Description

SEBI enhances BSDA facility by excluding ZCZP bonds and delisted securities from threshold calculation, requiring quarterly reassessment, and mandating active consent for regular demat accounts.

Summary

SEBI has issued this circular to enhance the Basic Services Demat Account (BSDA) facility to promote ease of investments and ease of doing business. The key changes include excluding Zero Coupon Zero Principal (ZCZP) bonds and delisted securities from threshold calculations, valuing illiquid securities at last closing price, requiring quarterly reassessment of BSDA eligibility by Depository Participants (DPs), and mandating active consent from beneficiary owners to avail or continue regular demat accounts. These provisions will come into force from March 31, 2026.

Key Points

  • Zero Coupon Zero Principal (ZCZP) bonds excluded from BSDA threshold reckoning
  • Delisted securities excluded from BSDA threshold calculation
  • Illiquid securities to be valued at last closing price for BSDA threshold
  • DPs must reassess BSDA eligibility every quarter (changed from earlier frequency)
  • Active consent required from beneficial owners through verifiable channels to avail/continue regular demat accounts
  • DPs must open only BSDA for eligible accounts unless BOs specifically consent to regular demat account
  • Suspended securities, delisted securities, and ZCZP bonds not considered for determining BSDA eligibility
  • Supersedes specific paragraphs 2.2(a), 2.2(b) and 2.3(c) of circular SEBI/HO/MIRSD/MIRSD-PoD1/P/CIR/2024/91 dated June 28, 2024

Regulatory Changes

Modified Para 2.2(a): DPs shall open only BSDA for eligible Beneficial Owners unless such BOs specifically provide consent through authenticated and verifiable channel to avail regular demat account facility.

Modified Para 2.2(b): DPs shall reassess eligibility of all existing BOs for BSDA at end of every quarter and convert eligible demat accounts into BSDA unless BOs provide consent through authenticated and verifiable channel (as specified by Depositories) to continue regular demat account.

Modified Para 2.3(c): Value of holding shall be determined based on:

  • Daily closing price or NAV of securities/mutual fund units
  • Last traded price if closing price unavailable
  • Face value for unlisted securities (other than mutual fund units)
  • Last closing price for illiquid securities
  • Suspended securities, delisted securities, and ZCZP bonds excluded from BSDA eligibility determination

Compliance Requirements

For Depositories:

  • Amend relevant bye-laws, rules and regulations immediately for implementation
  • Notify all Depository Participants about the provisions
  • Disseminate circular on their websites
  • Put in place appropriate systems and procedures within 75 days from circular date
  • Implement provisions after user testing within 90 days from circular date (by March 24, 2026)

For Depository Participants:

  • Open only BSDA for eligible accounts unless BO consents to regular account
  • Reassess BSDA eligibility for all existing BOs quarterly
  • Convert eligible accounts to BSDA unless BO provides active consent for regular account
  • Obtain consent through authenticated and verifiable channels as specified by Depositories
  • Apply modified valuation methodology for determining BSDA thresholds
  • Exclude ZCZP bonds, delisted securities from threshold calculations

Important Dates

  • December 24, 2025: Circular issuance date
  • March 09, 2026: Deadline for systems and procedures implementation (75 days from issuance)
  • March 24, 2026: Deadline for implementation after user testing (90 days from issuance)
  • March 31, 2026: Effective date - provisions come into force, superseding earlier circular paragraphs

Impact Assessment

Investor Impact:

  • Positive impact on small investors as more demat accounts will qualify for BSDA benefits (lower/nil charges)
  • Exclusion of ZCZP bonds and delisted securities from threshold increases BSDA eligibility
  • Quarterly reassessment ensures timely conversion of eligible accounts to BSDA
  • Active consent requirement protects investors from inadvertent account type changes

Depository Participant Impact:

  • Operational burden of quarterly reassessment instead of less frequent reviews
  • System changes required to implement modified valuation methodology
  • Process changes needed to obtain and verify active consent from beneficial owners
  • 90-day implementation timeline provides reasonable time for system upgrades

Market Impact:

  • Encourages broader retail participation in securities market through reduced costs
  • Aligns with ease of doing business and ease of investment initiatives
  • Supports financial inclusion objectives by making demat accounts more accessible

Impact Justification

Enhances BSDA facility to benefit small investors by excluding certain securities from threshold calculations and requiring quarterly reassessment. Affects DPs operationally but improves investor accessibility.