Know How to Convert Demat to BSDA
In 2012, the Securities and Exchange Board of India [SEBI] introduced an exclusive demat account for small investors called Basic Services Demat Account [BSDA]. Compared to a standard demat account, the BSDA is a convenient option and is typically targeted at those who do not frequently invest in mutual funds, stocks, ETFs etc. Let's find out more.
Advantages of holding BSDA
Typically, an investor needs a regular demat account to hold securities in its electronic format. However, it can be expensive for small investors not keen on investing regularly or frequently in the stock market.
Looking into small investors' interests and encourage them to participate in the stock market, SEBI introduced the BSDA to allow individual investors to maintain a single demat as the sole or primary account holder. Under the BSDA, you can hold securities of a value up to Rs. 2 lakhs. If you hold a standard demat account and wish to convert it into a BSDA, you can choose this no-frills format.
Holding a BSDA empowers you to participate in the stock market and trade in equities without having to worry about high maintenance costs. As a small investor, the standard charges of a regular demat account can be highly prohibitive, and hence having a BSDA account can be an enabling step in the right direction.
Additional read: What you need to know about dematerialisation and rematerialisation
Features of demat account under BSDA category
SEBI states that only one account can be opened under the BSDA category. You will need to be the first/primary/sole holder of the account. Besides, you cannot hold any other demat account with you being the primary holder across any depository.
To qualify for the BSDA category, the value of your securities held in your demat account must not exceed Rs. 2 lakhs at any time. Here, it is essential to remember that your demat account has a cutoff date. So, the balance in your account must consistently be under Rs. 2 lakhs to prevent its conversion back into a standard demat account.
You can choose to convert your existing demat account to the BSDA category, provided you do not hold any other demat account under the same PAN card as the sole holder.
Eligibility criteria to hold a BSDA
You must be the primary owner of the account.
You must not have any other demat account under your PAN card as the sole or primary holder.
You can only get one demat under the BSDA category.
The total value of the shares held in your BSDA must not exceed Rs 2 lakhs at any given point in time.
If you hold a regular/standard demat account jointly, you must not be the first holder of the account.
Cost benefits of a BSDA
On holdings worth Rs. 50,000, you do not need to pay AMC charges on your BSDA.
If your holdings are up to Rs. 2 lakhs, you will need to pay AMC charges with or without Power of Attorney [POA] at Rs. 100.
Suppose the holdings go above Rs. 2 lakhs. In that case, you will have to give an Annual Maintenance Charge depending on the rates offered by your Depository Participant applicable to regular [non-BSDA] demat from that date onwards.
Additional read: Ways to rebalance and consolidate your portfolio
What happens if your holdings exceed Rs. 2 lakhs
If the assets in your BSDA account exceed Rs. 2 lakhs, it means you no longer meet the eligibility criteria to maintain BSDA. In this case, your BSDA will then be converted into a regular demat account that will call for standard charges as specified by your broker.
If the value of your holdings reverts to the BSDA category, you can request the AMC to convert your standard demat account back to BSDA once your AMC billing cycle is complete.
How to convert your standard demat account into BSDA
To initiate the process of converting your regular demat account to BSDA, you will need to submit a request letter and fill out the declaration for the BSDA facility 15 days before your next billing cycle.
The regulator will check with the depository and exercise the right to convert your demat account into BSDA.
It is simple and easy to convert your demat account into BSDA. But remember to keep your custody value consistently lower than the threshold of Rs. 2 lakhs at all times to benefit from the features offered by the BSDA category.
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