The Securities and Exchange Board of India has proposed significant changes to the Basic Services Demat Account framework to make it fair for small investors and avoid unnecessarily burdening their portfolios. One of the key amendments is the elimination of delisted securities and zero‑coupon, zero‑principal (ZCZP) bonds from the valuation of an investor’s holdings for BSDA eligibility.
SEBI notes that these instruments have little liquidity or realisable market value and, therefore, their inclusion in an account's valuation unjustly disqualifies small investors from BSDA benefits.
The regulator, SEBI, had already enhanced the ceiling for BSDA-eligible holdings to the combined value of debt and non-debt securities from an earlier threshold of Rs. 2 lakh to Rs. 10 lakh.
This increases the number of retail investors under the BSDA regime, expanding its ambit. According to the new fee structure, no AMC shall be charged on accounts holding up to Rs. 4 lakh, while accounts in the Rs. 4 lakh–Rs. 10 lakh range will attract a low AMC of Rs. 100 per annum.
SEBI has proposed a quarterly, system-driven reevaluation of BSDA eligibility for all beneficial owners. This replaces the existing model, in which assessments are tied to billing cycles that vary across depository participants (DPs), making the entire process cumbersome.
SEBI, vide its earlier circular, mandated that for opening and categorization of accounts, all eligible new demat accounts shall be opened as BSDA by default unless the investor opts out. For existing eligible accounts, the conversion will occur in the next billing cycle, based on the holdings' closing value.
Essentially, from an investor's point of view, these reforms are seen as positive: they avoid the artificial inflation of portfolio value due to illiquid or non‑realisable instruments, while extending BSDA benefits to slightly larger yet still modest portfolios. This should lead to lower demat maintenance costs for a larger base of retail investors, thereby encouraging greater market participation.
However, holders of demat accounts should be aware of their BSDA status, particularly with respect to delisted securities and/or ZCZP bonds, as these will not be considered for future eligibility calculations. Simply put, SEBI's amendments aim to make the BSDA regime more inclusive, fair, and aligned with the real economic value of holdings for small investors.