Basic Service DEMAT Account: What Does it Entail?
To understand what a Basic Service DEMAT account really is, knowing what a DEMAT account stands for first is just the best way to go. Well, DEMAT which stands for a Dematerialized account, is a type of an account which stores your assets in a safe electronic form. According to the provisions by the SEBI (Securities and Exchange Board of India), all stock market investors must at least own a DEMAT account for eligibility to invest in India’s stock market.
Having known that, it goes without saying that a Basic Service DEMAT account popularly abbreviated as (BSDA), is just a special type of DEMAT account. Unlike a normal DEMAT account whose holders conduct lots of business transactions, things are a little more different for the case of BSDA. A basic service DEMAT account is specifically meant for small-scale investors such as the retailers who usually don’t invest a lot of money.
What Called for the Introduction of BSDA?
The SEBI whose key role is to regulate India’s stock market realized it was important to make the market-friendly to everyone. Being that taking part in the stock market needs one to at least own a DEMAT account, everything appeared really costly to the young players in the market. This is exactly what made SEBI to instruct the DPs (Depository Participants) to come up with the basic service DEMAT account. With the basic type, the retailers can invest in the stock market at unbelievably low maintenance costs.
Conditions to Owning a BSDA
There are two main conditions that an applicant must meet in order to open a basic service DEMAT account with any of the DPs (Banks & Broking Companies). First, you must not have any other DEMAT account at other DPs. In simple terms, it means you are only allowed to own one account. Additionally, your total investment must not go beyond Rs.200, 000 /-. All BSDA holders operate within the range of Rs.0.00 /- to Rs.200, 000/-.
Who should go for a Basic Service DEMAT account?
Well, as already mentioned earlier in this article, this kind of an account was created to cater for the retailers who could not manage to maintain a normal DEMAT account. A normal account is really expensive to run since the holders must pay a maintenance fee of between Rs.300/- and Rs.500/- annually. Surprisingly, that amount must be paid whether a transaction was done during the year or not. As for a BSDA, there’s much more relief as you will only pay if there were business transactions during the year.
How Does BSDA Works?
What is most exciting is that payments are made based on predetermined slabs. For Rs.0.00/- up to Rs.50, 000 investment, you really don’t have to pay any fee. While, if your investment lies above Rs.50, 000 and not more than Rs.200, 000, then you will only pay a service fee of Rs.100 annually.
You should, however, note that your respective DP (Bank or Broker) will be calculating your daily Net Asset Value (NAV) and should it go beyond the Rs.200, 000 maximum point, then your BSDA would automatically be upgraded to a normal DEMAT account. Your charges will, therefore, rise afterward.
How to Move from Normal to Basic Service DEMAT account
Alright, before you may even think of changing from normal to a basic account, you must ensure that the balance in your investment account is not anything above Rs.200, 000. Secondly, you must be the first and the only owner of your current normal DEMAT account. After confirming that all is okay, you will then write to your Depository Participant (DP) requesting for the change to be effected. They will then do their confirmations and they will make the change in the next cycle depending on your balance in the previous cycle. The entire process is incredibly fast and really straightforward so you should not worry about anything. Just follow the steps.
Important Features of BSDA
Even, though, some features are sane as those of the normal account, these ones are somehow linked to a basic service account.
SMS Alert – you must not log in all the time to check for transactions or any other details. A short message notification will always be sent to your phone informing you of any transaction which has been made.
Email Notifications – This is another simple yet an essential feature of a basic service DEMAT account. It lets you receive your account statements really easily on a quarterly basis. Because no printing will be involved, viewing your soft copy statements online can be pretty cheap.
Physical Statements – A part from receiving soft copy statements, they could as well be billed directly to your physical address. The first two are free of charge while the subsequent ones will be charged Rs.25/- each which is not even that expensive.
With all the above features, retailers can easily invest and grow the stock market within just a short duration.
Are There Any Differences between a Basic Service DEMAT account and a Normal DEMAT account?
Absolutely yes! And most importantly, the differences are also the advantages of BSDA over normal DEMAT account. Let’s have a quick look!
For a BSDA, the charges are based on predetermined slabs while for a normal account, the maintenance charges are fixed whether there’s business or not.
BSDA is for upcoming investors mostly the retailers while a normal DEMAT account is meant for the already established investors.
Lastly, BSDA is highly cheap compared to a regular DEMAT account. First, if you are a BSDA holder, you will pay an annual fee of Rs.100 for only transactions above Rs.50, 000. Anything below is free of charge.
On the other hand, a normal DEMAT account calls for a maintenance fee of between Rs.300 and Rs.500 annually regardless of whether the business was done or not. This could be really so expensive to run. On the worst side, the holders could hardly record profits on investments if they are retailers.
It is without any doubt that coming up with the idea of a basic service DEMAT account was the single best thing the SEBI could do not only in giving retailers a chance but also in expanding India’s stock market. You could just make a huge difference with your BSDA.