Basic demat account limit increased from Rs 2 lakh to Rs 10 lakh by Sebi

Capital market regulator Sebi on Friday increased a threshold applicable to basic service demat accounts by five times to Rs 10 lakh from the existing Rs 2 lakh, in a move aimed at enhancing investor participation. Sebi said that the new guidelines will take effect from September 1, it said in a circular. A basic services demat account - or BSDA - is a more basic version of a regular demat account, a facility introduced by the regulator back in 2012 to reduce the burden of demat charges on investors with small portfolios.

Here are five important things to know about this story: 

What does this threshold mean?

It is an upper limit applicable to basic services demat accounts determining the maximum value of securities it can hold.

What will happen after September 1?

Instead of securities worth a maximum of Rs 2 lakh, BSDA holders will be able to keep securities amounting up to Rs 10 lakh in demat form.  

What will the raised threshold of the basic services demat account do?

The move is expected to promote retail participation on Dalal Street, especially by small investors.

In other words, the move by Sebi is set to encourage retail investors to trade in the stock market.

Who can open a basic services demat account?

Only individuals meeting certain conditions can open and operate a basic services demat account. These conditions include:

The investor can keep only one demat account as the sole or first holder

The investor can have only one such account in their name across depositories

The value of securities - debt and non-debt combined - should not exceed the threshold (Rs 10 lakh with effect from September 1)

Annual maintenance fee 

Portfolios worth up to Rs 4 lakh will attract no annual maintenance charges, while those above Rs 4 lakh but up to Rs 10 lakh will attract a fee of Rs 100, according to the circular. 

What happens if the portfolio exceeds Rs 10 lakh? If the size of the portfolio exceeds Rs 10 lakh, the basic demat account is automatically converted into a regular demat account.