SEBI Updates BSDA Norms on Valuation | Exclusions | Eligibility Review

Circular No. HO/38/11/11(3)2025-MIRSD-POD/I/1101/2025, Dated 24.12.2025

1. Regulatory Background

The Securities and Exchange Board of India (SEBI) has directed further enhancements to the Facility for Basic Services Demat Account (BSDA) with the objective of strengthening financial inclusion, ensuring fair classification of investors, and preventing inadvertent migration of eligible investors to regular demat accounts.

The revised framework introduces clarifications on valuation, exclusions from threshold computation, periodic eligibility review, and investor consent requirements.

2. Key Enhancements to the BSDA Framework

2.1 Exclusion of Certain Securities From BSDA Threshold

SEBI has clarified that the following securities shall not be considered while computing the value threshold for BSDA eligibility:

• Zero Coupon Zero Principal (ZCZP) Bonds
• Delisted Securities

This exclusion ensures that investors holding such instruments are not disqualified from BSDA eligibility due to non-tradable or special-purpose securities.

2.2 Valuation of Illiquid Securities

The framework provides clarity on the valuation methodology for illiquid securities held in demat accounts for BSDA eligibility determination.

This ensures:

• Uniform valuation practices across Depository Participants (DPs)
• Prevention of arbitrary or inflated valuation of non-liquid holdings
• Fair and transparent assessment of investor eligibility

2.3 Mandatory Quarterly Reassessment by Depository Participants

SEBI has mandated that:

• Depository Participants must reassess BSDA eligibility on a quarterly basis
• Eligibility must be determined based on the value of holdings as per the prescribed framework

This periodic review ensures:

• Continued availability of BSDA benefits to eligible investors
• Timely migration only where thresholds are genuinely breached
• Ongoing accuracy in investor classification

2.4 Active and Verifiable Investor Consent for Regular Demat Accounts

To strengthen investor protection, SEBI has directed that:

• Investors opting for regular demat accounts instead of BSDA must provide Active, explicit, and verifiable consent
• Passive consent, default migration, or implied acceptance is not permitted

This ensures that investors:

• Are fully informed of cost implications
• Make a conscious and documented choice
• Are not automatically shifted to higher-cost demat accounts

3. Effective Date

• The enhanced BSDA framework shall come into effect from March 31, 2026

DPs are required to complete system and process readiness well before the effective date.

4. Regulatory Intent

SEBI’s measures aim to:

• Strengthen the original objective of BSDA as a low-cost demat facility
• Prevent unintended exclusion of small investors
• Improve transparency, consistency, and fairness in eligibility determination
• Enhance investor autonomy and consent-based decision-making
• Align demat account practices with consumer protection principles

5. Implications for Stakeholders

5.1 For Investors

• Continued access to BSDA benefits despite holding ZCZP bonds or delisted securities
• Clearer valuation norms and protection from forced account upgrades
• Greater control through mandatory consent requirements

5.2 For Depository Participants

Need to:

• Update systems for quarterly eligibility checks
• Exclude specified securities from threshold computation
• Implement robust consent capture and audit trails

• Revise internal SOPs, disclosures, and investor communication

6. Key Takeaway

SEBI’s enhanced BSDA framework strengthens investor protection and inclusion by refining eligibility calculations, mandating periodic reassessment, excluding non-relevant securities, and ensuring explicit investor consent—with all changes effective from March 31, 2026.

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