In a bid to give a push to equity investing, capital markets regulator Securities and Exchange Board of India on Monday introduced no-frills or basic trading accounts for small shareholders.
The regulator has directed all depository participants to provide 'basic services demat account', which will have substantial lower costs and will come with basic services.
BSDAs will have no annual maintenance charges if the value of securities held in the account is less than Rs 50,000.
If the value of securities is between Rs 50,000 and Rs 200,000, the investor will have to pay annual charge of Rs 100.
Currently, most investors have to pay about Rs 750 as annual maintenance charges to brokers irrespective value of holdings.
Sebi says reduction in cost will help in achieving wider financial inclusion and will also encourage individuals to open demat accounts.
As on August 25, there were about 20 million demat accounts in the country.
Dinesh Thakkar, chairman and managing director, Angel Broking, said: "Growth of demat accounts is not constrained by pricing. Although it's a welcome step, demat account opening will get a big push only when market conditions improve or whenever there is a good IPO (initial public offering).
Added Prashanth Prabhakaran, president, retail broking at India Infoline: "No frills demat account will bring more individuals to the markets.
"This, along with other initiatives like the Rajiv Gandhi Equity Savings Scheme, will
help in developing the equity culture in the country."
"All individuals who have or propose to have only one demat account and where they are the sole or first holder shall be eligible to have a BSDA," Sebi said in a press release on Monday.
"The value of holding shall be determined by the DPs on the basis of the daily closing price or NAV (net asset value) of the securities or units of mutual funds. If the value of holding in such BSDA exceeds the prescribed criteria at any date, the DPs may levy charges as applicable to regular accounts (non-BSDA) from that date onwards," said the release.
No-frills demat account will also help investors who wish to participate in IPOs. Last week, Sebi announced several initiatives to extend the reach of IPOs across the country.
Sebi said the move was taken after extensive consultation with all stakeholders with respect to cost of demat accounts especially from small individual investors.
BSDA holders will get transaction statements only at the end of every quarter.
If there are no transactions in any quarter, no transaction statement may be sent for that quarter.
Meanwhile in regular accounts where there are no transaction or that have nil balance, only one annual statement of holding will be sent in electronic or physical form as opted by the account user.
Electronic statements will be provided free of cost.
In case of physical statements, the DP will provide two statements free of cost during the billing cycle.
Additional physical statement may be charged at a fee not exceeding Rs 25 per statement, said Sebi.