Source: Mint
Context:
The Securities and Exchange Board of India (SEBI) has released a consultation paper (24 November 2025) proposing major revisions to the Basic Services Demat Account (BSDA) framework to ensure that BSDA eligibility reflects the true realizable portfolio value of small investors.
The move aims to promote financial inclusion, ease of investment, and lower costs for entry-level investors.
What is a Basic Services Demat Account (BSDA)?
A Basic Services Demat Account (BSDA) is a low-cost demat account introduced by SEBI in 2012 to reduce charges for small investors. BSDA eligibility depends on the value of securities held in the demat account.
Eligibility & Charges
- Portfolio value up to ₹10 lakh.
- Below ₹4 lakh → Zero AMC.
- ₹4 lakh–₹10 lakh → ₹100 AMC + GST.
- Above ₹10 lakh → Automatically becomes a regular (non-BSDA) demat account.
As of Feb 2025 (NSDL data):
- 1.3 crore BSDA accounts (< ₹4 lakh holdings)
- 4.4 lakh BSDA accounts (₹4–₹10 lakh holdings)
Issues in Existing BSDA Framework
SEBI observed several loopholes in the older system (introduced 2012):
Valuation ambiguities
- No clear rules for delisted shares, illiquid shares, or ZCZP bonds.
- Some depository participants counted the face value of ZCZP bonds (which have no redemption value), artificially inflating investor portfolios.
Operational gaps
- Eligibility reassessed based on different billing cycles, causing inconsistency.
- Opting out of BSDA allowed only through registered email ID — causing delays and low compliance.
- Depository participants (DPs) often did not convert eligible accounts to BSDA, causing small investors to overpay.
SEBI’s Key Proposals
Exclude ZCZP Bonds from BSDA Portfolio Valuation
- Zero Coupon Zero Principal (ZCZP) bonds are special financial instruments that are:
- non-transferable, non-tradable, carry no coupon, and have no redemption value.
- Treated as social contributions, not investments.
- Proposal: “ZCZP bonds shall not be considered for BSDA eligibility calculations.”
Exclude Delisted Shares Entirely
- Similar to suspended shares:
- Lack liquidity
- No price discovery
- No realizable value
- Proposal: Exclude delisted securities from BSDA valuation to ensure fairness for retail investors.
Treatment of Illiquid Securities
- Will continue to be valued at last closing price.
Quarterly Reassessment of BSDA Eligibility
- Replaces current billing-cycle-based reassessment.
- Introduces uniformity and automated system-driven checks.
Digital Flexibility for Beneficial Owners (BOs)
- Currently, BO consent is restricted to registered email ID.
- Proposal: Allow consent via additional authenticated digital channels for investor convenience.
Auto-Conversion to BSDA
- If eligible, DP must automatically convert the demat account to BSDA.
- BSDA becomes the default category unless an investor explicitly chooses a regular demat account.
Why SEBI is Revising the Framework Now
- Rapid rise in retail participation.
- Many small investors hold low/zero-value securities and unknowingly pay high AMC charges.
- DPs sometimes retain accounts as regular demat accounts to protect margins, hurting small investors.
- For investors with holdings as low as ₹50,000, AMC charges (~₹900) can feel disproportionate.
SEBI’s goal: Reduce friction + Protect small investors + Strengthen financial inclusion.
How These Changes Will Benefit Investors
Lower Costs for Small Investors
- Accurate valuation prevents unnecessary conversion to regular demat accounts.
- Auto-default BSDA reduces AMC burden for beginners.
Greater Transparency
- Clear rules on valuation of delisted / illiquid / ZCZP holdings.
Easier Processes
- Multi-channel authentication simplifies opting out.
- Quarterly, consistent assessment ensures fairness.
Boost to Retail Participation
Experts believe the reforms will:
- Increase demat penetration.
- Remove entry barriers.
- Improve investor experience.
