The Securities and Exchange Board of India has made it mandatory to have a Demat account for those who want to invest in equities. The move is to safeguard the investors and provide them with ease of investing and transparent, hassle-free transactions. The Demat account stores the shares electronically and ensures that the investors can trade in a matter of clicks. However, as an investor can open multiple Demat accounts, it is a possibility that a Demat account with a particular stockbroker may lie dormant. In such a case, the dormant Demat account would incur unnecessary expenses of maintenance fees. Thus, if investors decide to discontinue the Demat account, it is a must to know how to close the Demat account online.
What is a Demat Account?
Before you learn how to close your Demat account,it is important to know about the Demat account itself. 'Demat' refers to dematerialization, a process by which physical securities are converted into electronic format. Therefore, a trader can use a Demat app to hold, transfer, and transact securities without the hassles of dealing with physical securities. Specifically, these accounts are meant to convert share certificates from physical to electronic format, thereby providing greater accessibility for account holders.
Why should you close Dormant Demat Accounts?
Dormant Demat accounts are the ones that are inactive and do not see any transactions for several months. However, the DP or the stockbroker is legally liable to manage the Demat account for investor safety and to keep track, if the investor carries out any transaction. Therefore, the stockbroker charges the investors for the services rendered to maintain the Demat account even if it is dormant. The charge levied for these maintenance services is called the Annual Maintenance Charges, and the investor is liable to pay even in the case of no trading.
Furthermore, dormant Demat accounts are the haven for scammers who engage in a process known as front running. They illegally gain access to dormant Demat accounts and buy and sell securities based on insider trading to ensure their Demat account is not at the centre of the scam. They may alter the KYC information for the Demat account without you knowing such activity as dormant accounts are rarely monitored.
Hence, you must know how to close your Demat account online to ensure you incur no unnecessary charges and avoid being a part of a front-running scam.
Demat Account Closures: There are two types of Demat Account Closures
The process of how to close a Demat account includes two types through which you can close a Demat account online. These are:
- Full Account Closure: You can close the Demat account online fully if there are no holdings in your Demat account and you have made all the pending payments to the DP. Once you have ensured that your Demat account is fully dormant, you can raise a request to your DP for closing the Demat account.
Steps For Full Demat Account Closure:Follow the below steps for closing the current Demat account:
Step 1: Download the Demat Account Closure Form from the website of your depository participants, such as a bank or stockbroking firm.
Step 2: Fill in the Demat Account Closure form with all the required details and submit the form along with all the relevant documents. You can submit the form physically by visiting the nearest branch of your DP or mail them and the documents to their registered head office.
Step 3: Sign the Demat Account Closure Form in the presence of an official from the DP. If more than one person holds the Demat account, the DP will need the signature of both individuals.
Step 4: There must be no shares or negative balances in the Demat account before you submit the closure form.
- Transfer and Account Closure: If your Demat account still has some holdings or you haven’t made full payment for the pending charges, you have to first transfer the holdings and the pending payments to a different Demat account. Once the holdings and charges are transferred, you can raise a request to the DP to close the Demat account.
Steps For Transfer and Account Closure:You can close or delete your Demat account if you have a share transfer pending from one Demat to another.
Step 1:If you are transferring shares between the two depositories (NSDL and CDSL), you will require an Intra DIS slip and choose the ‘Off-Market transfer option’ in the current Demat account.
Step 2: You must acquire the original Client Master List (CML) from the Demat account with the stamp, signatures and logo.
Step 3: Afterwards, you must mention the names of the shares you wish to transfer along with their ISINs and other relevant details. Furthermore, you must state the target client with their 16-character code ID.
Step 4: Once you complete the form, submit the documents to your DP’s office physically or by sending the form and documents through mail to their registered head office.
Step 5:You must self-attest the Demat Closure form from a verified bank official. Once the form is successfully submitted, the DP will close or delete your Demat account.
How To Close Your Demat Account? The Do’s and Don'ts
To close a Demat account online, you must understand the process of how to close a Demat account. Most of the broking firms have an online process on their website to close a Demat account. However, some may even ask you to submit a letter in person requesting closure. Therefore, carefully read the whole closure process beforehand to be prepared.
Check if your broking firm provides any official closure form. This could be available to download from your broking firm’s website. This form will ask you to fill in all your personal and account identification data. This is how your broking firm ensures your authenticity. Submit the duly signed closure form along with the required documents to process the closure. While requesting to close your Demat account, don’t forget to check on the following:
- Ensure that there are zero holdings in your account. Sell any remaining shares before closing your account.
- Ensure that your Demat account does not have any negative balance. You can check these details by logging into your account online by contacting a registered branch of your brokerage.
- Ensure you download the ‘Account Closure Form’ and other important paperwork which will be necessary for you to submit when you request for Demat account closure.
How to Deactivate your Demat Account?
To learn how to close your Demat account, you have to understand the process of deactivating the Demat account. Fill up the account closure form by adding your latest information. Usually, if more than a single person operates a Demat account, all of the holders are necessitated to sign the account closure form in the presence of a DP (depository participant) from the broking firm. Hence, this process may have to be undergone at the broking firm’s branch office or the bank.
If at all, you wish to close your Demat account with some holdings in it. The closure process remains the same. You still will have to fill up the closure form. However, there will be an additional delivery instruction slip (DIS) or a similar document that you must fill to transfer your securities to a separate Demat account. Both accounts should usually have the same account holders.
You may be required to submit a client master report from a central depository of your new Demat account where you wish to transfer any preexisting securities. Usually, with this document, a stamp, logo, and signature are also required. There may be other KYC documents required. These documents need to be submitted to your DP’s head office. On submission, your request will be processed.
Details Required for Closing a Demat Account
To close a Demat account online, you would need to present or submit some legal documents to mark your ownership over the Demat account and its holdings. The details required for closing a Demat account are as follows:
- Your Demat account’s ID as well as your DP ID.
- Your KYC details, such as your name and addresses, are supposed to match those present in your account’s records.
- Your reason for closing your account at this moment.
- A verified and self-attested identity proof copy such as Aadhar, PAN, or passport. This may vary depending on the broking firms.
Conclusion:
As set forth above, closing a Demat account is quite simple. There are minimal steps involved and no additional charges to close your account. Closing an inactive account as soon as possible can save your money as your annual maintenance charge will cease. Now that you know the process of how to close your Demat account, you can process the process and avoid unnecessary charges and potential stock market scams.
