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Demat Account

Demat Account FAQs



Frequently Asked Questions

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Yes, having a Demat account is mandatory to apply for an Initial Public Offering (IPO) in India. A Demat account is required because IPO shares are issued in electronic form and are credited to the investor's Demat account.

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By providing the client identification number and the depository participant identification number, shares can be transferred between accounts off-market (that is, without going via a broker or stock exchange). You must turn in the completed slip to the relevant DP that oversees your demat account. After NSDL receives the executed document that the DP forwarded on the client's behalf, the transfer is impacted. Fees apply, and in addition to the off-market transfer slip, the transferor must annex a second form disclosing the market value of the shares they wish to transfer.

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No, typically, you need to have a Demat account to apply for an Initial Public Offering (IPO) in most countries, including India. IPO shares are issued in electronic form and are credited directly to the investor's Demat account. This electronic form of holding securities is secure and efficient.

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A Demat (Dematerialized) account is primarily used for holding and transacting in securities such as stocks and bonds in electronic form. Unlike a traditional savings account, a Demat account does not typically offer interest on the holdings.

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Maintenance charges for a Demat account may include account opening charges, annual maintenance charges (AMC), and transaction fees. There can be charges for buying, selling, and transferring securities.

Hidden charges vary among providers, so it's crucial to review the fee structure, including charges for additional services. Always read terms and conditions to understand the complete cost structure and inquire about any unclear fees before opening a Demat account.

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Yes, but each broker has a different approach. A few brokers have an annual maintenance, while others do not.

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Yes, a person can have more than one Demat account in their name. There is no restriction on the number of Demat accounts an individual can hold. However, having multiple accounts may lead to additional maintenance charges, and it's essential to manage them efficiently. Each Demat account needs to be opened with a different Depository Participant (DP). Having multiple accounts allows investors to manage different types of investments or trading strategies separately.

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Yes, a Demat account can be opened for a minor, operated by a guardian until the minor reaches the age of majority (usually 18 years). The guardian handles the account on behalf of the minor, and once the minor comes of age, they can take control of the account.

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The DP assigns the demat account number, commonly known as the customer ID number.

The number your broker assigns you for market trades is known as your trading account number.

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CDSL (Central Depository Services Limited) and NSDL (National Securities Depository Limited) are central depositories in India that facilitate the electronic holding and transfer of securities. They play a vital role in the dematerialization process, enabling investors to hold and trade securities in electronic form.

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A depository is a financial institution that holds and manages securities in electronic form on behalf of investors. It facilitates the dematerialization of physical securities and ensures secure and efficient transfer of ownership during stock market transactions. India has two depositories ie; CDSL (Central Depository Services Limited) and NSDL (National Securities Depository Limited).

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Investors can access the depository's services through its agents, known as depository participants (DPs). The depository appoints these agents with SEBI's consent. Three types of entities—Banks, Financial Institutions, and Members of Stock Exchanges registered with SEBI [TMs]—among others, are eligible to become DPs under SEBI laws.

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 Dematerialization is the process of converting physical share certificates into electronic form. It involves opening a Demat account, submitting physical certificates to a Depository Participant, verification, and receiving electronic shares credited to the Demat account. This eliminates the need for physical certificates and facilitates electronic trading of securities.

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When shares are held in a depository, they can be transferred right away in the event of a purchase. There is no need to pay stamp duty when transferring securities, and there are no associated hazards with physical certificates, such as fraudulent securities, misprints, faulty deliveries, etc. Also, it is advised that shares be stored in demat form with any depository participant (DP), as over 99% of stock exchange settlements occur in this format.

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There is no restriction on the number of Demat accounts an individual can open. You can have multiple Demat accounts with different Depository Participants (DPs). However, it's essential to manage them efficiently, considering potential maintenance charges associated with each account.

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Yes, there is a nomination facility in a Demat account. Account holders can nominate an individual to receive the securities in the event of their demise.

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When you have a Demat account, any changes in personal information such as address, bank details, or contact information should be communicated to your Depository Participant (DP).

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If you're not a frequent trader, periodically review your transaction statements for accuracy, monitor your investment portfolio, reconcile with personal records, understand associated charges, use the statements for tax planning, update personal information, and stay informed about market trends.

 

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If you have a problem with your NSDL Demat account, you can seek help by contacting the NSDL Customer Care or your Depository Participant (DP). They can assist with issues related to account statements, transactions, and general account management.

 

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Yes, you can take a loan against your demat holdings through a process called "loan against securities" or "margin funding." This involves pledging your securities as collateral to obtain a loan from a financial institution or broker.

 

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The charges for a Demat account include account opening fees, annual maintenance charges (AMC), and transaction fees. Specific amounts vary among service providers.

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Value-added facilities for a Demat account may include online access, real-time portfolio tracking, SMS/email alerts, electronic settlements, and additional research and market information.

 

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 To prevent misuse of securities in your Demat account:

  1. Secure login details.
  2. Enable two-factor authentication.
  3. Regularly monitor statements.
  4. Use secure devices.
  5. Update contact information.
  6. Utilize the nomination facility.
  7. Keep software updated.
  8. Beware of phishing attempts.
  9. Promptly report issues to your Depository Participant.
  10. Logout securely after each session.
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Yes, you can open more than one Demat account with the same Depository Participant (DP) in identical names.

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Yes, a Demat account can be opened with up to four holders' names, known as a joint Demat account.

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Yes, someone else can operate your Demat account on your behalf if you grant them Power of Attorney (POA) specifically for that purpose.

 

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A standing instruction in a Demat account opening form typically refers to an authorization given by the account holder to the Depository Participant (DP) for specific actions, such as credit of bonus shares, dividend, or any other corporate actions directly into the Demat account.

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A clearing member account is used for settlement and clearing purposes in the stock market. It belongs to a trading entity that participates in the clearinghouse activities.
A beneficiary account, on the other hand, is an account held by an individual investor in a depository like NSDL or CDSL. It holds securities in electronic form and is used for buying, selling, and holding investments.

 

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You can link up to five Demat Accounts (link) to your trading account with the majority of stock brokers in India. It's crucial to understand that you should be listed as the principal account holder on each of these demat accounts.

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Typically, one Demat account is sufficient for most investors. Consider opening multiple accounts only if you have specific reasons such as diversification needs or using different brokers.

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Yes, there is a nomination facility in a Demat account.

 

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No, you only need to update your personal details with your Depository Participant (DP), and they will communicate the changes to all companies where you hold securities.

 

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Annual maintenance charges (AMC), transaction fees, and account opening fees are all associated with Demat accounts. Service providers differ in specific quantities.

 

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There is no specific time limit for holding shares. You can hold them for as long as you want. Holding shares for the long term may offer benefits such as potential for capital appreciation, dividends, and reduced impact of short-term market volatility. However, the value of shares can still fluctuate, and it's important to monitor the company's performance over time.

 

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 Be cautious when granting Power of Attorney (PoA) to your broker for your Demat Account. To safeguard your account:

Regular Monitoring: Regularly monitor your account for any unauthorized transactions or discrepancies.

Review Statements: Carefully review your account statements to ensure accuracy and report any discrepancies promptly.

Password Security: Keep your account login credentials, including passwords and PINs, confidential. Change them periodically.

Dual Authentication: Enable dual authentication methods provided by your broker for an added layer of security.

 

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You could grant power of attorney (PoA) in the following cases:

  1. Special or Limited purpose PoA
  2. General purposes PoA
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The validity of a Power of Attorney (PoA) for a Demat account depends on the terms specified in the document. Typically, a PoA remains valid until it is revoked by the account holder or in accordance with the conditions mentioned in the PoA itself.

 

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No, there aren't any extra fees. It's included in the form for opening a demat account.

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Yes, brokers may allow the option for a time-bound Power of Attorney (PoA) for a Demat account. A time-bound PoA specifies a specific duration for which the powers granted under the PoA are valid. This can be a useful feature if you want to limit the authorization to a certain period or transaction.

When setting up a PoA with your broker, you can discuss and specify the time frame for which the PoA will be in effect. This allows you to maintain control over your account while still authorizing someone to act on your behalf for a defined period.

 

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A PoA does not necessarily have to be on stamp paper, but it must be executed and signed in accordance with legal requirements.

 

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Yes, if you are opening a demat account online using the AADHAR integrated eSign process, you can sign the Power of Attorney (POA) paperwork online. Regarding the rules, however, there is considerable ambiguity. Every broker handles it in a unique manner. While some only need a paper signed Power of Attorney, others can use eSi

 

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Technically, a broker may sell your demat position without your putting a sell order, abusing the Power of Attorney (POA).

However, the brokers are well regulated businesses. Any such behavior could result in severe fines or possibly lose one's membership in the depository and exchange (CDSL/NSDL).

However, the broker has the right to sell shares from your PoA-enabled demat account without providing you with prior notice if there is not enough margin available in your trading account.

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 No, a broker typically cannot withdraw money directly from your linked bank account using the Power of Attorney (PoA) you gave. The PoA usually grants authority for specific actions related to the Demat account, such as trading and managing securities, but not direct access to your bank account for withdrawals. Always review the terms of the PoA to understand the granted powers and consult with legal professionals if needed. 

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A Broker Pool Demat Account is an account where shares of multiple clients are held collectively, often in the name of the brokerage firm. In such accounts, individual clients may not have specific demarcations for their shares, and the shares are held in a pooled manner.

If you prefer not to give a Power of Attorney (PoA) to your broker, you should discuss this with the brokerage firm. Some brokers may allow you to hold your shares without a PoA, while others may have specific policies in place.

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Yes, you can trade in Futures and Options (F&O) without necessarily providing a Power of Attorney (PoA) for your Demat account. The PoA is typically required for the smooth settlement and transfer of shares in the cash segment. However, it may not be a mandatory requirement for trading in the derivatives segment, such as Futures and Options.

 

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A Demat Power of Attorney (POA) is required solely in order to pledge or sell shares. It is still possible to purchase shares, which will be credited to your demat account on T+2. POA is required in order to sell shares.

 

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To receive dividends directly to your bank instead of a cheque:

Contact Broker or Registrar: Reach out to your broker or the company's registrar.

Update Preferences: Use online platforms provided by the broker or registrar to update dividend payment preferences.

Provide Bank Details: Submit your bank account information, including account number and IFSC code.

Authorize Electronic Payments: Follow the instructions to authorize electronic dividend payments to your bank account. 

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Yes, you can add another person to your Demat account. This process is known as "joint holding" or "multiple holders" in a Demat account. However, the procedure might vary slightly among different brokers or depository participants.

 

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You need a Demat account for electronic holding and trading of financial securities, providing a secure and convenient way to buy, sell, and manage investments in the digital format.

 

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A practical method of investing in mutual funds is through SIP. A demat account is not required in order to invest in mutual funds. To trade NSE and BSE-listed stocks, futures, initial public offerings, and other securities, you must have a demat account.

 

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NSDL (National Securities Depository Limited) and CDSL (Central Depository Services Limited) are both depository organizations in India. The key differences are:

Establishment:

●       NSDL was established in 1996.

●       CDSL was established in 1999.

Promoters:

●       NSDL was promoted by institutions like IDBI, UTI, and NSE.

●       CDSL was promoted by entities including BSE, banks, and financial institutions.

Ownership:

●       NSDL is owned by a consortium of financial institutions.

●       CDSL is owned by various entities, including banks and BSE.

 

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No, none of the online stock brokers offer the simplest CDSL feature to their clients. This is due to the broker losing the Power of Attorney over your Demat Account when you join up for CDSL Easiest. You won't be able to sell shares from your holdings using your trading platform since the broker will no longer be able to debit shares from your Demat account.

 

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Indeed, it is possible to move shares between your CDSL and NSDL demat accounts. You must select the 'Inter-Depository' option as the transfer mode when moving shares between depository locations.

Note: On both depositories, the securities you are transferring must be eligible for dematerialization.

 

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If you do not pay the Annual Maintenance Charges (AMC) for your Demat account, the following consequences may occur:

Account Freezing: The depository participant (DP) or the broker may freeze your Demat account. This means you won't be able to transact or access the account until the outstanding AMC is paid.

Penalties and Late Fees: Some brokers may impose penalties or late fees for delayed payment of AMC. The charges and policies can vary among different brokers.

Closure of Account: If the non-payment continues for an extended period, the broker or DP may have the right to close your Demat account. This could result in the transfer or closure of your securities account.

Reactivation Fees: If your account is frozen or closed due to non-payment, reactivating it may involve additional fees or procedures which can cost you around 500 bucks.

 

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No, you cannot open a Demat account in India without a PAN (Permanent Account Number) card.

According to a SEBI circular in 2007, the PAN card is a mandatory document for all financial transactions in the country, including opening a Demat account. It is required for the purpose of tax identification and compliance with regulatory norms.

 

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