The Securities and Exchange Board of India (SEBI) has on 24 November proposed changes to the Basic Services Demat Account facility, with aim to improve ease of doing business and improve financial inclusion across India.
The markets regulator in a circular on Monday titled ‘Ease of investments and ease of doing business measures – Review of the ‘Facility for Basic Services Demat Account (BSDA) for Financial Inclusion’ made a host of proposals in its consultation paper.
What is BSDA facility for investors?
Basic Services Demat Account facility or BSDA is a “special category” or more stripped-down version of a usual demat account. Introduced in 2012, the facility allows investors with small portfolios to trade on reduced demat charges.
According to SEBI, if the stock holdings in a BSDA are less than ₹50,000, the annual maintenance charges are waived. These charges can range from ₹100-1,000, plus GST charges imposed by private brokerage firms.
Notably, public comments on the proposals are invited till December 15.
What are the changes SEBI is proposing?
Among some of the changes to its Basic Services Demat Account facility, SEBI has suggested that Zero Coupon Zero Principal (ZCZP) bonds be excluded from the portfolio value calculation to determine BSDA eligibility; treating delisted securities on par with suspended securities; trading mechanism for illiquid securities; and eligibility of existing beneficial owners.
SEBI on ZCZP bonds
As per the consultation paper, SEBI feels that ZCZP bonds are “fundamentally distinct from conventional securities held in a demat account, because they are non-transferable, non-tradable, and do not provide any monetary return or redemption value to the holder”.
“Their economic value is closer to a social contribution or donation made by the investor rather than an investment asset capable of appreciation, liquidation, or portfolio enhancement. Since BSDA eligibility is based on the realizable value of an investor’s holdings, counting ZCZP bonds, whose value cannot be encashed or traded, may artificially inflate a portfolio and make an investor ineligible for BSDA benefits,” it added.
Thus, under consideration is that ZCZP bonds be excluded while calculating the value of holding for the purpose of determining eligibility of demat accounts as BSDA.
Treatment of delisted securities
Further, on the treatment of delisted securities, the regulator has proposed that they be placed on par with suspended securities, as both “lack active trading, liquidity, and transparent price discovery”.
“Excluding delisted securities from BSDA valuation similar to the treatment of suspended securities would ensure consistency and maintain fairness for the investors whose holdings do not represent realizable market value,” it added.
Mechanisms for illiquid securities
For illiquid securities, Sebi noted that while they are not actively traded, they remain listed and can still be traded through specific mechanisms. Accordingly, it has been suggested that the last closing price of such securities be used when determining BSDA eligibility.
To promote ease of doing business for Depository Participants (DPs), Sebi proposed that DPs reassess the BSDA eligibility of existing beneficial owners on a quarterly basis, ensuring system-driven and uniform evaluations across all DPs. It also recommended allowing BO consent to be submitted through additional authenticated digital methods, instead of restricting it to the registered email ID.
Key Takeaways
- Sebi aims to improve financial inclusion through proposed changes to BSDA eligibility criteria.
- Excluding ZCZP bonds from portfolio calculations will help small investors qualify for BSDA benefits.
- Regular reassessment of BSDA eligibility by Depository Participants can ensure fair treatment of investors.
