Markets regulator Sebi on Monday proposed a review of the facility for ‘Basic Services Demat Account’ to improve financial inclusion, suggesting that ZCZP bonds should be excluded from the portfolio value calculation used to determine BSDA eligibility.
The proposal, if implemented, would support the twin objectives of ease of investment and ease of doing business, the Securities and Exchange Board of India (Sebi) said in its consultation paper. A basic service demat account, or BSDA, is a more basic version of a regular demat account.
When was this facility first introduced by SEBI?
The facility was introduced by Sebi in 2012 for reducing the burden of demat charges on investors with small portfolios. The regulator explained that ZCZP bonds are fundamentally distinct from conventional securities held in a demat account, because they are non-transferable, non-tradable, and do not provide any monetary return or redemption value to the holder.
Their economic value is closer to a social contribution or donation made by the investor rather than an investment asset capable of appreciation, liquidation, or portfolio enhancement.
Since BSDA eligibility is based on the realizable value of an investor’s holdings, counting ZCZP bonds, whose value cannot be encashed or traded, may artificially inflate a portfolio and make an investor ineligible for BSDA benefits, it added.Accordingly, Sebi has proposed that “ZCZP bonds shall not be considered while calculating the value of holding for the purpose of determining eligibility of demat accounts as BSDA”.
SEBI’s recommendations
The regulator has also proposed treating delisted securities on par with suspended securities, as both lack active trading, liquidity, and transparent price discovery. Excluding delisted securities from BSDA valuation would ensure consistency and fairness, especially for investors whose holdings do not represent realizable market value.
For illiquid securities, Sebi noted that while they are not actively traded, they remain listed and can still be traded through specific mechanisms. Accordingly, it has been suggested that the last closing price of such securities be used when determining BSDA eligibility.
To promote ease of doing business for Depository Participants (DPs), Sebi proposed that DPs reassess the BSDA eligibility of existing beneficial owners on a quarterly basis, ensuring system-driven and uniform evaluations across all DPs.
It also recommended allowing BO consent to be submitted through additional authenticated digital methods, instead of restricting it to the registered email ID. The regulator has invited public comments on the proposals until December 15.