SEBI Proposes Excluding ZCZP Bonds for Basic Services Demat Account (BSDA) Eligibility
The Securities and Exchange Board of India (SEBI) has announced draft proposals aimed at improving financial inclusion by relooking at the eligibility criteria for Basic Services Demat Accounts (BSDA), which are designed for small investors. The key suggestions focus on excluding certain non-traditional and illiquid securities from the calculation used to determine an investor’s eligibility for the account.
Key Proposals for BSDA Eligibility
SEBI is re-examining provisions related to BSDA eligibility, account conversion, charge structure, and the valuation of securities held by small investors.
Excluding Zero Coupon Zero Principal (ZCZP) Bonds
SEBI suggested that Zero Coupon Zero Principal (ZCZP) bonds should be excluded when determining an investor’s eligibility for a BSDA.
Rationale: ZCZP bonds are fundamentally distinct from conventional securities. They are non-transferable, non-tradable, and do not provide any monetary return or redemption value to the holder.
Impact: Including ZCZP bonds could artificially inflate the portfolio value, potentially making an investor ineligible for the BSDA, even though the bonds do not represent real financial assets.
Treating Delisted and Suspended Securities Similarly
SEBI also proposed to treat delisted securities on par with suspended securities for determining BSDA eligibility.
Rationale: Both delisted and suspended securities lack active trading and, therefore, do not represent a realizable market value.
Fairness: Excluding delisted securities from BSDA valuation would ensure consistency and maintain fairness for investors whose holdings do not represent realisable market value.
Focus on Financial Inclusion
These measures are intended to address practical challenges and ensure that the BSDA framework effectively serves its purpose of facilitating financial inclusion by providing essential demat services at a lower cost to genuinely small investors. The proposal emphasizes that the price of illiquid securities may be considered for determining BSDA eligibility only under specific conditions.
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