Demat or Dematerialised accounts are a great way for most people to make money on the side. For investors trading in the securities markets, it is compulsory to have an online account.
According to SEBI, there are around 44.46 million Demat accounts in the country. In its most basic form, it is nothing but an electronic account to hold shares and securities. With a growing economy, more people are looking to get on the stock exchange train.
However, as big as numbers might be SEBI has also shown that almost 75% of accounts are dormant. An unused Demat account is a drain on finances and attracts annual fees and maintenance charges. Hence, it's a good idea to avoid any unnecessary expenditure and close your Demat account online.
There are two types of Demat account closures:
- Account closure: When there are no pending payments or holdings in the investors’ account, a request can be raised with the concerned depository partner(DP) to close the Demat account online.
- Transfer and account closure: If there are pending securities that need to be shifted to another Demat account then the procedure is slightly different.
Process to close a demat account in case of account closure:
Step 1 - Download the Demat account closure form from your depository participant’s (bank or investment agency) website.
Step 2 - Then fill in the form accurately and submit it with your KYC documents. Make sure all the proofs are valid. This step involves physically submitting the forms and documents to the closest DPs office or by mailing them to the concerned head office.
Step 3 - If more than one person holds the account then both need to sign the closure form in the presence of an official from their DP.
Step 4 - Ensure that there are no shares in the account and it does not have a negative balance. This can be checked by logging into your account.
Process to close or delete a demat account in caseof transferring pending holdings or shares from one Demat account to another:
Step 1 -India has two national depositories, NSDL and CDSL. In case of intra-depository transfers, an Intra DIS slip will be required and the ‘Off-Market transfer option in the Demat account must be chosen as well.
Step 2 - Then the original CML (client master list) with the logo, stamp and signatures must be acquired from the account.
Step 3 - After this, the completed form with relevant details and names of the shares you wish to transfer along with their ISINs must be mentioned. The target client will also have to be stated along with their ID which is a 16-character code.
Step 4 - Post this the documents must be submitted to your DP’s office or mail it to their head office.
Step 5 - For closure, it is also compulsory for a bank official to verify the self-attested Demat closure form.
Why You Should Not Close a Demat Account
Ideally, once you have opened a demat account online, you have the means to trade in securities and store your assets in a safe way, in electronic format. Nonetheless, you may think of closing your demat account entirely, if you cease to hold any stock in the account. After all, the account comes with charges levied even if you have a dormant (not-in-use) account. Still, you have taken the trouble to open one, and closing it may cause you some inconvenience in the future.
The arena of investment is so diverse today, and investors must leave their options open to investing whenever opportunities arise. There are many ways to invest in the stock markets, not least being direct equity investments. In case you have sold your stock for profit and have no securities lying in your demat account, think twice before you go ahead and close it. Markets may be bearish when you close your account, but could turn bullish in the future. You have no way of predicting events can influence market upturns. At such turning points, investors regret demat account closure as they cannot make the most of investment in the share market when prices are right and quick decisions are the need of the hour.
Your mind can change just as much as the share market can change its outlook. Furthermore, demat accounts are linked to trading accounts, so closing one account means the termination of another important account. What’s more, your demat account does not just store your shares, but other assets such as ETFs (exchange traded funds), government securities, bonds, etc. In the event some of these are held in a demat account, and you wish to keep them securely, it's wise to keep the account open. Many securities appreciate in value when held for the long run. Hence, demat accounts should be kept active and open.
Why You Should Not Close a Demat Account
Ideally, once you have opened a demat account online, you have the means to trade in securities and store your assets in a safe way, in electronic format. Nonetheless, you may think of closing your demat account entirely, if you cease to hold any stock in the account. After all, the account comes with charges levied even if you have a dormant (not-in-use) account. Still, you have taken the trouble to open one, and closing it may cause you some inconvenience in the future.
The arena of investment is so diverse today, and investors must leave their options open to investing whenever opportunities arise. There are many ways to invest in the stock markets, not least being direct equity investments. In case you have sold your stock for profit and have no securities lying in your demat account, think twice before you go ahead and close it. Markets may be bearish when you close your account, but could turn bullish in the future. You have no way of predicting events can influence market upturns. At such turning points, investors regret demat account closure as they cannot make the most of investment in the share market when prices are right and quick decisions are the need of the hour.
Your mind can change just as much as the share market can change its outlook. Furthermore, demat accounts are linked to trading accounts, so closing one account means the termination of another important account. What’s more, your demat account does not just store your shares, but other assets such as ETFs (exchange traded funds), government securities, bonds, etc. In the event some of these are held in a demat account, and you wish to keep them securely, it's wise to keep the account open. Many securities appreciate in value when held for the long run. Hence, demat accounts should be kept active and open. \
Conclusion
Though Demat accounts cannot be completely closed online, they can be made easier by fulfilling the formalities online. It is imperative to check if there are no overdue charges, penalties or shares pending in the account and that the details are filled in accurately. While transferring any shares or accounts, the individual’s details must be checked to avoid any mistakes or lapses.
Related Articles:How To Transfer Shares From One Demat Account To Other?|How Do I Add A Nominee To My Demat Account|Want to Open a Demat Account? Here's What You Should Know|How to Open a Demat Account Without a Broker|Importance of Monitoring your Demat Holdings Account
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As a seasoned financial expert with extensive knowledge in securities markets and investment practices, I find the topic of Demat accounts and their management to be of paramount importance, especially in the context of the Indian market. The information presented in the article is well-aligned with industry standards, and I'll elaborate on the key concepts covered.
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Demat or Dematerialised Accounts:
- Demat accounts are electronic accounts used to hold shares and securities in an electronic format, eliminating the need for physical share certificates.
- Essential for investors trading in securities markets, making it compulsory to have an online account.
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SEBI and Demat Account Statistics:
- The Securities and Exchange Board of India (SEBI) oversees securities markets and regulations.
- The article mentions that there are approximately 44.46 million Demat accounts in India, emphasizing the widespread adoption of this electronic form of holding securities.
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Dormant Demat Accounts:
- SEBI data reveals that almost 75% of Demat accounts are dormant, signifying accounts with no trading activity.
- Dormant accounts can accrue annual fees and maintenance charges, making them a financial burden.
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Types of Demat Account Closures:
- Account Closure: Involves closing the Demat account when there are no pending payments or holdings. The account holder requests closure from the depository partner (DP).
- Transfer and Account Closure: If there are pending securities that need to be shifted to another Demat account, a different procedure is followed.
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Process to Close a Demat Account:
- In the case of account closure, the process involves downloading the closure form, filling it accurately, submitting KYC documents, and ensuring no pending shares or negative balance.
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Intra-Depository Transfers:
- Mention of two national depositories, NSDL and CDSL.
- Intra-depository transfers require an Intra DIS slip and selection of the 'Off-Market transfer' option in the Demat account.
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Reasons Not to Close a Demat Account:
- The article emphasizes reasons for keeping a Demat account open even when not actively trading:
- Diverse investment opportunities in the stock market.
- Market fluctuations and the unpredictability of future opportunities.
- Linkage of Demat accounts to trading accounts and the broader spectrum of assets stored in Demat accounts, such as ETFs, government securities, bonds, etc.
- Possibility of securities appreciating in value over the long run.
- The article emphasizes reasons for keeping a Demat account open even when not actively trading:
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Conclusion:
- Demat accounts cannot be completely closed online, but the formalities can be fulfilled online.
- Important to check for overdue charges, penalties, or pending shares before initiating the closure process.
- Highlights the significance of accuracy in details during any transfer of shares or accounts.
In summary, managing a Demat account involves understanding the nuances of closure processes, considering market dynamics, and making informed decisions to optimize investment opportunities.
