How to Convert Demat to BSDA?

Introduction

A Demat Account or Depository Account is a bank account used to keep securities such as shares, debentures, and bonds. The Securities and Exchange Board of India (SEBI) regulates the stock exchanges in India. It has issued regulations that require every listed company to maintain a minimum number of Demat Accounts.

The most basic type of Demat account is called a Basic Service Demat Account (BSDA). For this account, the service provider (usually a broker) will provide you with services such as remitting dividends, voting at the AGM and purchasing shares. This is the bare minimum that the brokers must do by the SEBI. It is impossible to invest in new issues using this account unless you add additional features or upgrade your account.

What is a BSDA Account?

BSDA is a particular type of Demat account available only to individuals, HUFs, trusts and partnerships. Investors can open a BSDA account with any depository participants (DPs) through their stockbrokers. A BSDA account is similar to the regular Demat account, with the only difference being that it provides for an unlimited credit facility. This means that no margin money is required to be deposited by investors.

There is a charge associated with adding new features or ancillary services and on how to convert Demat account to BSDA. However, you can also add some features without paying any extra fees. To help retail investors save on trading commissions, various online platforms offer Demat services that allow you to buy and sell shares of listed companies without actually transferring the physical certificate.

This was only possible recently if you had a Demat account or needed to open Demat account with a scheduled bank. However, some online brokerages have started offering BSDA service, which is quite similar to the DEMAT service but available only with them.

The BSDA or Basic Service Demat Account is a particular DEMAT account that allows you to trade in dematerialized stocks on an exchange platform. It does not come with a chequebook or passbook, and all transactions are done electronically. You can use this account if you do not want to bother physically transferring stocks between two destinations every time you buy or sell a share.

How Does the BSDA Account Work?

To open a BSDA account, you need to fill up the Know Your Customer (KYC) form and submit documents like recent bank statements and address proof along with it. The entire process might take up to 10 days. Once your documents are verified, the BSDA account will be opened and linked to your trading platform. You can start trading right away, but there is one catch — you can not withdraw any money from this account.

The BSDA offers complete freedom from any service tax, stamp duty or custodian charges and enables you to transact in the shares listed on the stock exchange without any minimum value restriction. It also allows you to operate multiple transactions like transfer and purchase/sale of shares and make deposits/withdrawals at any point in time.

The account holder also has permission to withdraw money from their Demat account at any time, even if they cannot transact in securities. Opening a BSDA is quick and easy. All it takes is two documents - a declaration and an application form signed by both you and your DP representative.

Simple Steps to Open a BSDA Account

You can get the application form from your broker and fill it up with the details such as the applicant's name, name of the stock exchange, bank details, and provide identity proof like an Aadhaar card or Pan card copy, etc. After filling up the application form duly with all the details, you can send it to your broker, who will submit it on your behalf. Once NSDL or CDSL, or both, accept the application, you will receive a notification regarding it.

Converting from Demat to BSDA is necessary for all investors. If you are working with a broker, he must do it for you; otherwise, you will have to do it yourself. After receiving the approval for conversion from NSDL/CDSL, you can directly deposit the amount in any bank account registered in your name. After that, send a letter to your broker stating that you have deposited such an amount in this particular bank account and ask them to transfer it accordingly.

Why Is the BSDA an Account of Choice?

The BSDA is the preferred account for investors who wish to hold their shares electronically. A Demat account is a form of stock market trading in India. You can buy or sell your investments in shares, debt instruments etc., from this account. Whether you hold any share of stock, mutual funds or ETF units, you have to allocate it to the securities trading Demat account. The Demat account is entirely free and safe for you as a client, and trades are executed on a 24-hour basis.

BSDA is a particular type of DEMAT account for investors holding securities in physical form. A savings account offers interest on the balance held at the end of every quarter. The investor can make deposits or withdrawals without any restrictions to the BSDA account. However, the investor cannot pledge his holdings in the BSDA as collateral for a loan or as security against any other financial obligation. The investor can also close his BSDA account at any point in time by giving written notice to the depository participant (DP) concerned.

Wrapping Up

What's more, investors are not required to convert their BSDA to a Demat account mandatorily - there is no time limit specified for such a conversion. However, once you switch from BSDA to Demat, you cannot change your mind and go back!