Opt for Basic Services Demat Account

Most of us have one or multiple demat accounts where the investments (stocks and mutual fund units in this case) are held.  The charges for demat account varies across players but generally are upwards of Rs. 400 per annum.  For eg: ICICI Securities charges Rs. 500 per annum for a demat account.

However what many of us are not aware about is in case the holding in our demat account is not significant, we can opt to switch to Basic Services Demat Account (BSDA) where charges are capped at Rs 100 per annum. 

Though Rs. 400 per annum of savings may not be a significant amount, the objective here to use the low cost facility available without compromising on the features and benefits.  In this post, we shall delve into features about BSDA and who can open it.

Who can have BSDA?

Sebi vide its circular dated August 27, 2012 mandated depositories to provide an option from October 1, 2012 to all retail individual investors to open BSDA.  Thus this is an old concept but not many are aware about it since it has not been publicised by depositories for obvious reasons.  An individual can have one BSDA account across all depositories.  Such individual should be a sole or first account holder and the demat account can be treated as BSDA if the total value of the securities held in such account does not exceeds Rs 2,00,000 at any point of time.

For eg: If you are having two demat accounts, say one with ICICI Securities and another with HDFC Securities, only one out of the it can be BSDA provided the value of securities in such demat account does not exceeds Rs. 2,00,000.

Similarly if in one demat account you are the sole holder and in the other you are not the first holder, then the demat account where you are the sole holder is only eligible for BSDA, again provided the value of the securities does not exceeds Rs 2,00,000.  However the other demat account can be eligible for BSDA for the first holder of that account.

Charges

The charge for BSDA depends on value of securities in the demat account.  If the value of securities does not exceeds Rs. 50,000, then there is no annual maintenance charge.  In case the value of securities is between Rs. 50,001 to Rs. 2,00,000, then the maximum amount the depository can charge is Rs. 100.  If the value of securities in a BSDA account exceeds the above limit on any day during the tenure, then it ceases to be BSDA account and charges applicable to regular accounts shall apply from that date onwards.

How is value of securities determined?

Value of securities is determined based on the market value of securities held in the account. In case of unlisted securities, face value shall be taken into account.  In case of mutual fund units held in demat account, daily NAV shall be used to determine the value.  Such value should not exceed Rs. 2,00,000 to qualify for BSDA.

How to open BSDA account?

An individual can choose for BSDA account at the time of opening a demat account.  In case one already has a demat account, there is an option to convert the same into BSDA account at the end of the billing cycle provided the value of securities in demat account does not exceeds Rs. 2,00,000.  Infact your depository shall provide you the option to convert your account into BSDA before commencement of next billing cycle based on the value of your holdings.

Other features of BSDA account

• An individual shall receive transaction statement at the end of each quarter provided there are transactions during the period. 
• An annual physical statement of holding shall be sent at the end of the year.
• Electronic statements shall be provided free of cost.
• In case of physical statements, the depository shall provide at least two statements free of cost during the billing cycle. Additional physical statement may be charged at a fee not exceeding Rs.25/- per statement.
• SMS facilities for transaction alert is provided without any additional cost.
• Minimum two delivery instruction slips shall be issued at the time of opening BSDA.

Bachhat’s take

While the monetary benefit is not significant in absolute term, it is always preferable to have services with minimal cost and one can opt for BSDA if the holding does not exceeds Rs. 2,00,000.  Further in case of a family having multiple demat accounts, each account is eligible for BSDA if the accounts are in the name of different family members.

Where you aware about BSDA?  Will you opt for or have opted for BSDA?  Do share your thoughts and comments in the comment section below.

National Housing Board Tax Free Bonds – March 7, 2014 to March 18, 2014

NHB has joined the bandwagon with its tax free bonds.  The issue is open for subscription till March 18, 2014 with best available interest rates amongst other live issues.  While IRFC is facing problem with attracting investors forcing it to extent the closing date to March 14, 2014, NHB is providing short window of 12 days for subscription.

Key Features of Bond Issue:

For other details about the issue as well as risk factors, kindly go through the Prospectus before investing.

Comparison

Out of all the current bond issues live for subscription, NHB provides the best interest rates and hence should be the first choice of investment for individuals looking for investment in tax free bonds.  However, one should invest immediately and should not wait till the closing date since the issue is on first cum first serve basis and the issue size is small.

Interest rates on small savings schemes for financial year 2014-2015

Government has announced interest rates on small savings schemes for financial year 2014-2015.  This is in line with recommendations of Shyamala Gopinath Committee for Comprehensive Review of National Small Savings Fund.

Interest Rates on small savings schemes

While interest rates for most of the instrument types have remained unchanged, rates on post office time deposits have been revised upwards by 10 bps to 20 bps (100 bps is equivalent to 1 percentage point.).  Public Provident Fund remains one of the best option for long term secured investment.

Update: Withdrawal of bank notes issued prior to 2005 extended till January 1, 2015

Subsequent to its advisory dated January 22, 2014 and as noted in our earlier post, RBI has extended the date for exchanging pre-2005 bank notes from March 31, 2014 to January 1, 2015. RBI has also clarified that public can continue to freely use these notes for any transaction as such notes continue to remain legal tender.

Exchange of notes - experience

While there has been minor hiccups while exchanging the notes with banks,carrying the printout of RBI's press release shall be handy at the time of exchange of notes.  Though the release says that there is no need to provide any details of depositor nor to have banking account with the bank where one is exchanging the pre-2005 notes, few banks are refusing to exchange the money and mandating to deposit the same in the account.

Where you able to exchange pre-2005 bank notes without any hassle?  Did your bank refuse to exchange the notes and mandated you to deposit the money in your account?  Kindly share your experiences in the comment section below.