Small individual investors will be able to get no-frills demat accounts for trading in stocks, mutual funds and other securities from Monday without any annual maintenance charges for holdings up to Rs 50,000.

Also, the charges would be capped at a maximum of Rs 100 a year if the value of their portfolio is up to Rs two lakh.

The move is part of market regulator Sebi's efforts to encourage an investment culture in the country and reach out to a larger number of small investors.

As per a Sebi circular, coming into effect from October 1, depository participants, which manage the investors' demat accounts, have been asked to provide the small individual investors with an option to get a 'Basic Service Demat Account (BSDA)' with limited services and nil or small charges.

Sebi (Securities and Exchange Board of India) expects to achieve wider financial inclusion, encourage holding of demat accounts and reduce the cost of maintaining securities in demat accounts for retail individual investors with this move. To trade in the market, it is necessary to have a demat account, where shares and other securities can be held in dematerialised or electronic format.

The investors can hold securities worth up to Rs 2 lakh in no-frills accounts and the depository participants managing their accounts would review the accounts at the end of every billing cycle.

If the value of holding in such accounts exceed Rs 2 lakh limit, the applicable charges would apply, while the investors holding normal accounts would also be given an option to convert to no-frills account if the value of their holdings dips below this threshold limit.

The value of holding will be determined on the basis of the daily closing price or NAV of the securities or units of mutual funds. If the value of holding in such BSDA exceeds the prescribed criteria at any date, the the charges applicable to regular accounts can be levied from that date onwards.

A facility of no-frills savings account already in place at various banks as per directions of the banking sector regulator RBI (Reserve Bank of India).

As per Sebi's directions, investors would get electronic statements free of cost for these accounts. Besides, at least two physical statements would also be provided free of cost during the billing cycle and any additional physical statement may be charged at a fee not exceeding Rs 25 per statement.

The investors would also get SMS alert facility for all debit transactions on these accounts through their mobile phones. All individuals, who propose to have only one demat account and those who have accounts where the person is not the first holder, would be eligible for BSDA. 
PTI