The Securities & Exchange Board of India (SEBI) on Monday announced no-frills demat accounts for small investors and cut annual charges on investments in demat form in a bid to encourage wider retail participation in the stock market.

Small investors who hold their shares in demat form but hardly trade will now not have to pay anything in case their investments are under Rs 50,000. Those small investors who hold shares worth in the range of Rs 50,001 to Rs 2 lakh will have to pay an annual maintenance charge of just Rs 100, which is just a fraction of what they are paying now.

Currently, regardless of the value of holdings, some depository participants or the brokers who offer demat services to investors, charge anywhere in the range of Rs 225 to Rs 900 per annum.

Speaking about the measure, SEBI added, "The value of holding should be determined by the DPs (depository participants) on the basis of the daily closing price or NAV of the securities or units of mutual funds."

However, the regulator added that if the value of holding would exceed the prescribed limit, the DPs would be able to levy charges as applicable to regular accounts from that date onwards.

But only those individual investors who own just one demat account and are the sole holder of the account will be able to avail the opportunity of reduced charges.

The market regulator said that the move would broaden the reach of IPOs for the benefit of retail investors and promote holding of demat accounts.