SEBI Proposes Changes to BSDA Rules to Improve Investor Access

The Securities and Exchange Board of India (SEBI) has released a new consultation paper suggesting important changes to the rules for Basic Services Demat Accounts (BSDAs). These changes aim to enhance financial inclusion and make investing easier for people with smaller portfolios. One of the key proposals is to exclude Zero Coupon Zero Principal (ZCZP) bonds from the calculation of portfolio value used to determine BSDA eligibility.

What Is a BSDA?

A Basic Services Demat Account is a simpler version of a regular demat account. Introduced in 2012, it was designed to reduce charges for investors who hold smaller amounts of securities. The benefits of a BSDA depend on the value of holdings in the account, so accurate calculation of portfolio value is essential.

Why Exclude ZCZP Bonds?

SEBI explained that ZCZP bonds are different from normal securities. These bonds cannot be traded, transferred, or redeemed. They also do not provide any financial return. For this reason, they behave more like a social contribution rather than an investment.

Including these bonds in the portfolio calculation may artificially increase the value of an investor’s holdings. This could make the investor ineligible for the low-cost benefits of a BSDA, even though the bonds have no realisable market value. SEBI has therefore proposed that ZCZP bonds be kept out of BSDA valuation.

Treatment of Delisted and Illiquid Securities

The regulator has also suggested changes in how delisted and illiquid securities are considered.

• Delisted securities: SEBI wants them to be treated like suspended securities. Neither type of security has active trading, liquidity, or transparent price discovery. Excluding them from BSDA valuation would provide fairness, especially when such holdings cannot be sold easily.
• Illiquid securities: These remain listed but are not frequently traded. SEBI has proposed using the last available closing price for calculating their value when determining BSDA eligibility.

Operational Changes for Depository Participants

To make processes smoother for Depository Participants (DPs), SEBI has proposed quarterly assessments of BSDA eligibility. This system-driven approach would ensure consistency across all DPs. SEBI has also suggested allowing beneficial owners to give consent through additional digital authentication methods, rather than only via their registered email ID.

Read more: Infosys Buyback: How Much Tax Will You Pay on The Buyback Amount?

Conclusion

SEBI’s proposals aim to make the BSDA framework fairer and more accessible for small investors. By excluding non-realisable holdings like ZCZP bonds and delisted securities, the regulator intends to ensure that only true, tradeable portfolio value is considered. The suggested operational changes also support easier and more efficient handling of demat accounts. Public comments on the proposals are open until 15 December.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks. Read all the related documents carefully before investing.