SEBI Proposes Changes to Basic Services Demat Accounts Norms

In a move to fine-tune regulations that promote retail investor participation in India’s capital markets, the Securities and Exchange Board of India (SEBI) has proposed a key revision to the framework governing Basic Services Demat Accounts (BSDA). In a draft circular released on November 25, 2025, SEBI suggested that zero-coupon, zero-principal (ZCZP) bonds should be excluded from the valuation of securities used to determine BSDA eligibility. This development comes as part of a broader review of BSDA norms, aimed at aligning the eligibility criteria with the evolving nature of financial instruments and improving the focus on genuine small investors.

What Are BSDA Accounts?

A Basic Services Demat Account (BSDA) is a simplified demat account facility introduced by SEBI in 2012. It is designed to reduce the cost burden on small and first-time investors by capping annual maintenance charges based on the value of securities held.

To be eligible, the value of holdings in a BSDA must remain below a prescribed limit, currently ₹2 lakh. Investors can only hold one BSDA across depositories. BSDA accounts offer a reduced cost structure, making market access more inclusive.

SEBI’s New Proposal: Key Points

1. Exclusion of ZCZP Bonds from BSDA Valuation

SEBI has proposed the exclusion of ZCZP bonds—bonds that neither carry a coupon (interest payment) nor repay principal—from the total value of holdings considered when evaluating BSDA eligibility.

These bonds, often issued for corporate social responsibility (CSR) obligations, lack active trading, do not offer monetary returns, and do not reflect an investor’s active engagement in the capital markets. SEBI argues that counting such instruments toward BSDA valuation may give an inflated picture of an investor’s true portfolio.

2. Equating Delisted Securities with Suspended Ones

The regulator also proposed to treat delisted securities the same as suspended securities for BSDA eligibility purposes. Since delisted and suspended securities are not traded on stock exchanges, they do not provide liquidity or market price discovery.

This equivalence ensures that non-tradable holdings do not misrepresent an investor’s market exposure, keeping the BSDA eligibility focused on active investments.

Rationale Behind the Proposals

SEBI’s proposal is rooted in the objective of ensuring that the BSDA facility reaches genuine small investors. By refining what counts as “active” holdings, the regulator aims to prevent high-value but non-liquid or non-return generating instruments from disqualifying small investors from receiving low-cost demat benefits.

Such measures are intended to promote financial inclusion by,

• Enhancing access to demat accounts for underrepresented groups.
• Avoiding distorted valuations due to non-tradable instruments.
• Encouraging transparent and fair assessments of investor eligibility.

Re-examination of Broader BSDA Norms

In addition to the changes regarding ZCZP bonds and delisted securities, SEBI is conducting a comprehensive review of BSDA norms, including,

• Eligibility criteria for opening BSDA.
• Automatic conversion of eligible existing demat accounts into BSDAs.
• Revision of charge structures based on the value of securities held.

Unified methodology for valuation of holdings across instruments and platforms.

Implications for Small Investors

If implemented, the proposed changes could provide immediate relief to many small investors who might currently be disqualified from BSDA benefits due to holding ZCZP or delisted securities. These reforms can also lead to,

• Better targeting of subsidised services.
• Enhanced participation of rural and low-income investors.
• Clearer regulatory guidance for depository participants and brokers.