After Reserve bank of India move for basic saving account, Securities and exchange board of India(SEBI) has introduced basic trading account or no-frills demat account for the small investors and shareholders. This is the move to encourage more and more investors to invest in the share market. The basic demat account is very low cost demat account and cover all the basic services.
The basic service demat accounts will come with all the basic services and the charges will depends on the value of shares held in the accounts. There will be no charge for the basic demat account, if the value of the shares held is less than 50000. If the value of the shares is in between 50 thousand to 2 lakh, the annual charges will be 100 rupees per year.
SEBI wants to open more and more demat account of the people. In India there are around 20 million demat accounts now. But the annual charges for the demat account are high as 400-800 rupees per year depending on depository to depository service.
But most people thinks that the growth in the demat accounts is not depending on the annual charges. People hardly cares of the maintenance charges of the demat accounts. The growth comes when there is a big initial public offer (IPO) coming in the primary market. Demat accounts increased at the peak when the initial public offer of Reliance Power came when it crossed all the records in opening the demat accounts in a week. But no frills accounts will also boost the individuals as well as investors to come in the market.
Government also gives some rebate like Rajiv Gandhi equity saving scheme for income tax saving purposes which also bring individuals into the market.
But there is a condition to open a basic service demats account (BSDA). All individuals who have or propose to have only one demat account and where they are the sole or first holder shall be eligible to have a BSDA. The second condition is that if the value of the shares crossed the eligible amounts of investment in the BSDA accounts, the same account will be converted to the simple demat account and the charges will be the same as simple demat account.
The charges for the basic service demat account will be determined by the holdings of the investors which will be determined by the closing price of the equity or mutual fund or the net assets value (NAV). The main use of the basic service demat accounts for the investors who wish to participate in the primary market means to invest in the initial public offer (IPOs).
In basic service demat account; statement will be issued in every quarter in electronic or physical mode. If there is no transaction in any quarter, no statement will be issued for that particular quarter. There is no charges for the electronic statement whereas for the physical statement, two physical statement will be provided free of cost in a year and after that if investor wish to have more statement the charges will not be excess to 25 rupees per statement.
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