How will the revised BSDA rules affect demat account holders?

MUMBAI: The Securities and Exchange Board of India (Sebi) has suggested excluding delisted securities and zero-coupon, zero-principal bonds from the portfolio value calculation for determining eligibility of demat accounts as basic services accounts. This includes the regulator’s proposals to change the rules for basic services demat accounts.

SEBI introduced the concept of Basic Services Demat Account (BSDA) in 2012. Holders of this account need not pay annual maintenance charges if the holding value is up to ₹4 lakh.

Sebi said delisted securities will be treated at par with suspended securities for determining BSDA eligibility, as these securities lack active trading, transparent price discovery and liquidity.

Exclusion of delisted securities from BSDA valuation, similar to the treatment of suspended securities, will ensure continuity and maintain fairness for investors whose holdings do not represent actual market value, Sebi said in a discussion paper released on Monday.

For illiquid securities, it said the last closing price will be taken into account to determine eligibility.

Zero-coupon, zero-principal (ZCZP) bonds issued under the Social Impact Framework are also held in demat form. These bonds are counted at their purchase price to determine BSDA eligibility. However, these bonds are fundamentally different from conventional securities held in demat accounts, as they are non-transferable, non-tradable and do not provide any financial return or redemption value to the holder. Their economic value is closer to the social contribution or donation made by the investor than to investment assets capable of appreciation, liquidation or portfolio growth.

“Since BSDA eligibility is intended to be determined based on the actual value of the investor’s holdings, considering the value of ZCZPs in the value of holdings for determining BSDA eligibility may artificially inflate the portfolio value and make the investor ineligible for BSDA,” Sebi said.