The Government appears to be pulling out all stops to ensure that the newly-created Rajiv Gandhi Equity Linked Savings Scheme, which was announced in the Budget, becomes a success.
The scheme, aimed at low networth retail investors with annual incomes of under Rs 10 lakh, offers a tax break for subscribers. Meanwhile, highly placed sources said stock market regulator SEBI is “actively working” on the modalities of creating a low-frill/no-frill demat account, which would ease the entry of such investors into the markets.
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The Finance Ministry, on its part, has also initiated steps for making a demat account attractive for debutant investors under Rajiv Gandhi Equity Scheme. The ‘low-frill' or no-frill demat account will be mainly for those retail investors who make very few transactions. Under such a system, annual fixed maintenance charges could be very low while the investors will not be required to pay charges for holding statements or transaction statements.
At present, an investor is provided a holding statement every quarter and a statement about every transaction. For this, the investor is required to pay for every dispatch. Now, in case of low-frill or no-frill demat accounts, investors will simply be informed electronically about transaction or holding, the source said.
ANMI supports move
Meanwhile, the Finance Ministry has got support from the Association of National Stock Exchange Members (ANMI) on making demat accounts attractive for the new investors who may enter the stock market through the Rajiv Gandhi Equity Scheme.
The thinking is to make the new demat account free of annual maintenance charges in the first year. Annual maintenance charges vary from Rs 250 to Rs 450. “We feel these charges can be shared amongst depository participants, custodians such as NSDL and CDSL besides others,” Mr Vijay Bhushan, Vice-Chairman of ANMI (Northern Region) said.
ANMI estimates that the total number of demat accounts in India is as low as 1.8 crore, as against the population base of 120 crore. According to the Finance Ministry, there are around 1.5 crore PAN holders with an income between Rs 2-10 lakh who do not have a demat account.
Mr Bhushan suggested that the prosposed scheme be extended to all retail investors for subscription to issues for public sector divestment. Given the existing 1.5 crore equity investors, the potential subscription to public sector divestment would be Rs 75,000 crore a year.