SEBI to Review Basic Services Demat Account: ZCZP Bonds, Digital Consent Among Proposed Changes

The Securities and Exchange Board of India (SEBI) announced on November 24, 2025, a comprehensive review of the Basic Services Demat Account (BSDA) facility aimed at enhancing ease of investment and doing business while promoting greater financial inclusion across India. The markets regulator has released a consultation paper proposing several significant changes and invited public comments until December 15, 2025.

Understanding Basic Services Demat Account (BSDA)

Before examining the proposed changes, it's essential to understand what BSDA represents. Introduced in 2012, the Basic Services Demat Account is a special category of demat account designed specifically for small investors with limited portfolios.

Key Features of Current BSDA

According to SEBI regulations, BSDA offers substantial cost benefits to eligible investors:

• Zero annual maintenance charges: If stock holdings are valued at less than ₹50,000
• Cost savings: Regular annual maintenance charges typically range from ₹100 to ₹1,000, plus GST, charged by private brokerage firms
• Financial inclusion focus: Designed to encourage participation from small investors who might be deterred by high account maintenance costs

This facility has played a crucial role in democratizing access to capital markets for millions of small investors across India.

Major Proposed Changes to BSDA

SEBI's consultation paper outlines several key proposals designed to refine and improve the BSDA framework:

1. Exclusion of ZCZP Bonds from Portfolio Valuation

One of the most significant proposals involves the treatment of Zero Coupon Zero Principal (ZCZP) bonds in BSDA eligibility calculations.

SEBI's rationale emphasizes that ZCZP bonds are "fundamentally distinct from conventional securities" because they are:

• Non-transferable: Cannot be sold to other investors
• Non-tradable: Cannot be traded on exchanges
• Zero monetary return: Provide no interest income or redemption value to holders

The regulator notes that these bonds represent "closer to a social contribution or donation" rather than traditional investment assets capable of appreciation, liquidation, or portfolio enhancement.

Impact on BSDA Eligibility

SEBI argues that including ZCZP bonds in portfolio valuations may "artificially inflate a portfolio and make an investor ineligible for BSDA benefits" despite the bonds having no realizable value. Since BSDA eligibility is based on the realizable value of holdings, excluding ZCZP bonds would ensure that only securities with actual market value are considered.

2. Treatment of Delisted Securities

SEBI has proposed placing delisted securities on par with suspended securities for BSDA valuation purposes. The regulator's reasoning highlights that both categories:

• Lack active trading opportunities
• Have minimal or no liquidity
• Suffer from absence of transparent price discovery mechanisms

The consultation paper states: "Excluding delisted securities from BSDA valuation similar to the treatment of suspended securities would ensure consistency and maintain fairness for the investors whose holdings do not represent realizable market value."

This change would prevent investors from being penalized or losing BSDA benefits due to holdings that have become worthless through delisting events beyond their control.

3. Inclusion of Illiquid Securities

Regarding illiquid securities, SEBI has taken a more inclusive approach. The regulator noted that while these securities are not actively traded, they continue to remain listed and are traded on stock exchange platforms through specific mechanisms.

The proposal suggests that illiquid securities "may be considered for the purpose of determining BSDA eligibility," recognizing that these securities, unlike delisted ones, maintain some degree of market presence and potential realizability.

However, SEBI has clarified that valuation criteria for determining BSDA eligibility shall not be applicable for promoter individuals, ensuring that corporate insiders are treated differently from retail investors.

Operational and Administrative Improvements

Quarterly Reassessment of BSDA Eligibility

Recognizing that billing cycles vary across different Depository Participants (DPs), which can create confusion and operational challenges, SEBI has proposed a standardized approach.

The regulator suggests that DPs should reassess the eligibility of existing Beneficial Owners (BOs) for BSDA and convert eligible accounts into BSDA on a quarterly basis. This system-driven approach would:

• Ensure consistent treatment across all DPs
• Provide operational convenience to depositories and DPs
• Enhance ease of doing business
• Reduce manual intervention and potential errors
• Automatically upgrade or downgrade accounts based on portfolio value changes

Digital Consent Mechanism

To improve investor experience and modernize the consent process, SEBI has proposed allowing consent through multiple digital channels:

• Registered email-ID: Direct consent through email registered with the DP
• Other authenticated means: Additional digital authentication methods as technology evolves

This digital-first approach aligns with India's broader push toward paperless processes and reduces friction in account management.

Benefits of Proposed Changes

The proposed modifications to BSDA regulations are expected to deliver several benefits:

For Small Investors

• More accurate assessment of portfolio value for BSDA eligibility
• Fair treatment when holdings become delisted or suspended
• Reduced risk of losing BSDA benefits due to non-realizable holdings
• Simplified consent and account management processes

For Depository Participants

• Standardized processes reducing operational complexity
• Automated quarterly reassessment reducing manual workload
• Clear guidelines for handling various security categories
• Reduced customer service issues related to BSDA eligibility disputes

For Financial Inclusion

• More investors eligible for BSDA benefits
• Reduced barriers to market participation for small investors
• Fairer system that accounts for market realities
• Enhanced trust in capital market infrastructure

Context: SEBI's Broader Reform Agenda

This BSDA review fits within SEBI's larger mandate to:

• Enhance investor protection and education
• Promote financial inclusion and market accessibility
• Simplify regulatory compliance and ease of doing business
• Modernize market infrastructure through digital transformation
• Adapt regulations to evolving market conditions and investor needs

The consultation paper represents SEBI's commitment to evidence-based policymaking, inviting stakeholder input before implementing changes.

Public Consultation Process

SEBI has adopted a transparent, participatory approach to regulatory reform by inviting public comments on the proposals.

How to Submit Comments

Interested stakeholders can submit comments and suggestions through the following channels:

• Deadline: December 15, 2025
• Online submission: Through SEBI's public comment portal at https://www.sebi.gov.in/sebiweb/publiccommentv2/PublicCommentAction.do?doPublicComments=yes
• Email (for technical issues): consultationMIRSD@sebi.gov.in
• Subject line: "On Ease of investments and ease of doing business measures – Review of the Facility for Basic Services Demat Account (BSDA) for Financial Inclusion"

Who Should Participate?

SEBI welcomes input from diverse stakeholders including:

• Individual investors, particularly small investors using or eligible for BSDA
• Depository Participants and depositories
• Brokerage firms and financial intermediaries
• Investor associations and advocacy groups
• Market infrastructure institutions
• Legal and financial experts

Potential Implementation Timeline

While SEBI has not specified an implementation timeline, the typical process involves:

• Consultation period: November 24 - December 15, 2025
• Comment review: SEBI staff analyze submissions and feedback
• Final regulations: Issuance of final circular incorporating appropriate suggestions
• Implementation period: Grace period for DPs to update systems and processes
• Effective date: Formal implementation across all market participants

Expected Impact on Market Participation

If implemented as proposed, these changes could significantly impact India's capital market participation:

• Increased BSDA eligibility: More investors qualifying due to exclusion of ZCZP bonds and delisted securities
• Reduced account maintenance costs: Lower barriers to sustained market participation
• Enhanced financial inclusion: Particularly benefiting rural and semi-urban investors
• Improved investor confidence: Fairer treatment of market events beyond investor control

Stakeholder Reactions and Considerations

Various stakeholders may view these proposals differently:

Small Investors

Likely to welcome changes that prevent loss of BSDA benefits due to non-realizable holdings, while appreciating simplified digital consent mechanisms.

Depository Participants

May appreciate standardized quarterly reassessment reducing operational variability, though implementation will require system upgrades.

Market Infrastructure Institutions

Could benefit from clearer guidelines reducing interpretive disputes and customer complaints.

Conclusion

SEBI's proposed revisions to the Basic Services Demat Account framework represent a thoughtful evolution of regulations introduced over a decade ago. By addressing emerging issues like ZCZP bonds, standardizing treatment of non-performing securities, and embracing digital processes, the regulator demonstrates responsiveness to changing market conditions.

The consultation process ensures that final regulations benefit from diverse perspectives and practical insights from market participants. Investors, particularly those with small portfolios, should pay attention to these developments as they could significantly impact account maintenance costs and market accessibility.

As India continues its journey toward becoming a fully inclusive financial market, refinements to facilities like BSDA play a crucial role in ensuring that regulatory frameworks serve their intended purpose: democratizing access to capital markets for all investors, regardless of portfolio size.

Disclaimer: The views and investment tips expressed in this article are for informational purposes only and do not represent financial advice. The views expressed are those of the sources cited and not necessarily those of this website or its management. Investing in equities or other financial instruments carries the risk of financial loss. Readers must exercise due caution and conduct their own research before making any investment decisions. We are not liable for any losses incurred as a result of decisions made based on this article. Please consult a qualified financial advisor before making any investment.

Read More

Adani's $1.2 Billion Copper Smelter Operating at Fraction of Capacity Amid Global Ore Shortage

Gautam Adani's ambitious $1.2 billion copper smelter in Gujarat is facing significant operational challenges, running at merely a fraction of its designed capacity due to a severe global copper ore supply shortage. Kutch Copper Ltd., which commenced metal processing in June after experiencing multiple delays, has imported less than 10% of the raw material required for full-scale operations, highlighting the intense competition for copper concentrate worldwide.

Stark Supply Shortfall

According to customs data compiled, Kutch Copper imported approximately 147,000 tons of copper concentrate during the 10-month period ending October. This pales in comparison to the 1.6 million tons of concentrate required annually to operate the 500,000-ton-per-year plant at full capacity.

To put this in perspective, competitor Hindalco Industries Ltd. purchased over 1 million tons during the same timeframe, demonstrating the vast difference in procurement capabilities between established players and new market entrants.

Global Supply Squeeze Intensifies

The challenges facing Kutch Copper reflect broader disruptions in the global copper supply chain. Copper smelters worldwide have been impacted by a series of mine disruptions throughout the year affecting major producers:

• Freeport-McMoRan Inc.: One of the world's largest copper producers
• Hudbay Minerals Inc.: Significant North American copper miner
• Ivanhoe Mines Ltd.: Major African copper producer
• Codelco: Chile's state-owned copper giant and world's largest producer

These disruptions have created a significant supply-demand imbalance in the copper concentrate market, disadvantaging newer facilities without established procurement relationships.

China's Smelting Expansion Compounds Pressure

Adding to the supply squeeze, China's relentless expansion of its domestic smelting capacity has intensified competition for available ore. This expansion has:

• Battered profit margins across the industry
• Forced some international producers to curtail output
• Led to shutdowns of less competitive facilities outside China
• Driven treatment and refining charges to record lows

The oversupply of smelting capacity relative to concentrate availability has fundamentally altered industry economics, creating challenging conditions for new entrants attempting to establish operations.

Record Low Processing Fees Signal Desperate Competition

Treatment and refining charges (TC/RCs)—the fees that miners pay smelters for processing ore into refined metal—have hit record lows this year. This metric indicates that smelters are accepting ever-tighter profit margins simply to secure sufficient raw material to maintain operations.

The compression of these fees reflects the power shift in the copper value chain, with mine operators now commanding premium positions while smelters compete aggressively for limited concentrate supplies.

Implications for Kutch Copper

For new facilities like Kutch Copper, which plans to double annual capacity to 1 million tons within four years, the tight supply environment presents multiple challenges:

• Higher operational expenses: Premium prices for securing concentrate
• Extended ramp-up period: Slower path to full capacity utilization
• Reduced profitability: Compressed margins during critical early operational phase
• Competitive disadvantage: Established players have secured long-term supply agreements

Supplier Relationships and Import Sources

Customs data reveals that Kutch Copper has established relationships with several major global mining companies:

• BHP Group: Supplied 4,700 tons to the facility
• Glencore Plc: Major global commodity trader and miner providing shipments
• Hudbay: Canadian mining company contributing to supply

However, these volumes remain modest compared to the facility's requirements, suggesting that establishing robust, long-term supply agreements with major miners will be critical for future success.

Expert Analysis: Short-Term Pain for Long-Term Gain

Industry analysts acknowledge the challenging environment facing the new smelter. Grant Sporre, an analyst at Bloomberg Intelligence, offered perspective on Kutch Copper's situation:

"Adani's smelter is new and so should be more efficient than many competitors, so in the short term the smelter could ramp up at a loss," Sporre noted. He suggested that India could introduce higher tariffs to protect its domestic industries, which would mean accepting "short-term pain for a longer term gain."

This strategy would involve operating at reduced profitability or losses initially while building market position and waiting for supply conditions to improve or for policy support to materialize.

India's Strategic Metals Self-Reliance Challenge

Kutch Copper's difficulties exemplify broader challenges facing India's efforts to enhance metals self-reliance. The country confronts a fundamental mismatch:

Demand Side

• Surging copper demand from infrastructure projects
• Rapidly expanding power sector requirements
• Growing construction industry consumption
• Increasing electrification and renewable energy installations

Supply Side Constraints

• Limited domestic copper ore reserves
• Constrained processing capacity
• Dependence on imported concentrate
• Competition from established global players for raw materials

This gap between domestic demand growth and limited local production capability makes India vulnerable to global supply disruptions and price volatility.

Technological Efficiency Advantage

Despite current operational challenges, Kutch Copper benefits from being a newly constructed facility incorporating modern technology. This provides potential advantages:

• Energy efficiency: Lower power consumption per ton of output
• Environmental compliance: State-of-the-art emission controls
• Automation: Reduced labor costs and improved process control
• Operational flexibility: Ability to process various concentrate grades

These efficiency advantages could prove decisive once raw material supply stabilizes, potentially allowing the facility to operate profitably even with compressed margins.

Strategic Importance of Copper

Copper plays a critical role in India's development trajectory and energy transition:

• Renewable energy: Essential for solar panels, wind turbines, and grid infrastructure
• Electric vehicles: EVs contain significantly more copper than traditional vehicles
• Construction: Wiring, plumbing, and building systems
• Electronics manufacturing: Growing domestic electronics industry
• Power transmission: Expanding electrical grid requirements

Securing reliable copper supply through domestic processing capacity aligns with broader strategic objectives around manufacturing self-reliance and supply chain security.

Market Dynamics and Future Outlook

Several factors will influence Kutch Copper's future operational trajectory:

Potential Positive Developments

• New mine capacity coming online globally
• Resolution of existing mine disruptions
• Stabilization of China's smelting capacity additions
• Establishment of long-term offtake agreements with miners
• Government policy support through tariff protection

Ongoing Challenges

• Continued competition for limited concentrate supplies
• Pressure on processing margins
• Geopolitical factors affecting mineral supply chains
• Capital costs of maintaining underutilized capacity

Comparison with Established Competitors

The stark difference between Kutch Copper's 147,000 tons of concentrate imports and Hindalco's over 1 million tons during the same period illustrates the advantages held by established players:

• Decades-long relationships with major mining companies
• Long-term supply contracts negotiated during favorable market conditions
• Diversified supplier base reducing concentration risk
• Financial strength to offer attractive commercial terms
• Technical support and partnership arrangements with miners

Path Forward for Kutch Copper

For Kutch Copper to achieve its ambitious doubling of capacity to 1 million tons within four years, the company will need to:

• Aggressively pursue long-term supply agreements with global miners
• Consider upstream integration through mine investments or partnerships
• Leverage Adani Group's financial resources during the ramp-up phase
• Optimize operations to minimize costs and improve competitiveness
• Explore government policy support mechanisms
• Develop alternative sourcing strategies including secondary copper

Broader Implications

Kutch Copper's challenges serve as a case study in the complexities of establishing new smelting capacity in an oversupplied market with constrained raw material availability. The situation highlights that building physical assets represents only one aspect of success—securing reliable raw material supply chains proves equally critical.

For India's broader industrialization and self-reliance objectives, the experience underscores the importance of coordinated strategies that address both processing capacity and upstream raw material security simultaneously.

Disclaimer: The views and investment tips expressed in this article are for informational purposes only and do not represent financial advice. The views expressed are those of the sources cited and not necessarily those of this website or its management. Investing in equities or other financial instruments carries the risk of financial loss. Readers must exercise due caution and conduct their own research before making any investment decisions. We are not liable for any losses incurred as a result of decisions made based on this article. Please consult a qualified financial advisor before making any investment.

Read More