Demat charges feel too high? Sebi's new review could ease the load

By reworking rules for illiquid and non-tradable securities, Sebi hopes to make demat accounts cheaper and fairer for first-time and small investors.

Markets regulator Sebi has proposed a fresh review of the Basic Services Demat Account (BSDA) framework to make it easier and cheaper for small investors to participate in the capital markets. The proposals, released through a consultation paper earlier this week, aim to improve both financial inclusion and ease of doing business.

 

What Sebi wants to change

A BSDA is a low-cost version of a regular demat account, introduced in 2012 to reduce maintenance charges for investors with small portfolios. Sebi’s latest consultation paper suggests that the current eligibility criteria may unintentionally exclude investors whose holdings do not have realisable market value.

 

According to the PTI report, Sebi has highlighted three key areas where changes are needed:

 

1. Excluding ZCZP bonds from portfolio value

 

Zero-coupon, zero-principal (ZCZP) bonds, often issued under social impact schemes, are non-transferable, non-tradable and provide no monetary returns. Sebi noted that these instruments function “closer to a social contribution” than an investment asset.

 

Since BSDA eligibility is based on the realisable value of a portfolio, counting such bonds could artificially inflate an investor’s holdings and push them out of BSDA eligibility. Sebi has therefore proposed that ZCZP bonds should not be included when calculating portfolio value for BSDA.

 

2. Treating delisted securities like suspended ones

 

Delisted securities lack liquidity and transparent price discovery. Much like suspended securities, they do not reflect realisable value. Sebi has suggested excluding delisted securities from BSDA valuation to make the assessment fair and consistent.

 

3. Using last closing price for illiquid securities

 

Illiquid but still-listed securities can technically be traded through specific mechanisms. Sebi has proposed using the last closing price of such securities when determining BSDA eligibility.

 

Operational changes for smoother compliance

 

To ease operational load on Depository Participants (DPs), Sebi wants BSDA eligibility for existing account holders to be reassessed quarterly through system-driven checks.

 

It has also proposed allowing beneficial owners to give consent through multiple authenticated digital modes, rather than restricting communication to the registered email alone.

 

These changes, Sebi believes, will help maintain uniformity across DPs and reduce administrative friction.

 

What’s next?

Sebi has invited public comments on the proposals until December 15, according to PTI. If implemented, the revised framework could help more small investors access low-cost demat services without being penalised for holding instruments that have no cash value.

 

(With inputs from PTI)