When should a Demat account be closed?
- The ability to hold shares and securities electronically is made possible by a Demat Account, also known as a Dematerialized Account. A Demat Account is a digital account used to buy and store securities during online trading. In this way, you can easily facilitate trade. Shares, ETFs, treasury and corporate bonds, and mutual funds can all be kept in one convenient location thanks to a Demat Account.
- Depository services are offered in India by National Securities Depositories Ltd (NSDL) and Central Depositories Services (India) Ltd (CDSL). These services are made available to you as an investor through intermediaries, depository participants, or stockbrokers.
Before you close your Demat account online or offline, you should be aware of the two types of closures:
- When a Demat account has no holdings, payments, or charges outstanding, the account holder may request to close the account. All that is required is a request be sent to the relevant depository participant. This can be done online and is usually met with a quick response, making the entire process easy to handle.
- Transferring and closing an account can be complicated if there are securities or fees owed in the demat account. There are usually a number of steps that must be taken before the account in question can be closed, including moving the relevant information to another Demat account.
Account Closure Resulting in Demat Account Closure
1. To close your Demat account, visit the website of your depository participant (bank or investment firm) and download the appropriate form.
Second, make sure you fill out the form to the letter and attach your KYC paperwork. Check that every single proof is correct. At this point, you can either hand the paperwork over at the local DP office or send it off in the mail to the right place of business.
Third, have all account holders sign the closure form in front of the DP agent if the account is a joint one.
4. Verify that there are no shares in the account and that there is no deficit. You can check this by logging into your account.
When transferring, a Demat account must be closed.
The 'Off-Market transfer' option in your Demat account and an Intra DIS slip are required for intra-depository transfers.
Obtaining the original client master list (CML) from the account with the stamp, logo, and signatures is the next step.
Third, send in the completed form with the necessary details and the names and ISINs of the shares you wish to transfer. Target client ID and additional information will be required.
After number 4, you need to either hand-deliver or mail the documents to your DP's office.
The self-attested Demat closure form must be verified by a bank representative prior to the closing of the account.
If you have multiple Demat accounts and decide you no longer want to invest in the securities market, you may be wondering how to close them.
- You must physically visit the office of the Depository Participant and submit a Demat account closure form and supporting documentation in order to close your Demat account.
- The Depository Participant's website also has this form available for download.
The Demat account closure form requires the following information:
1 Client ID and DP ID
2 The information you provide on the Demat closure form must be consistent with the information held by NSDL or CDSL, depending on the circumstances.
You may close an account voluntarily or involuntarily due to certain events, such as the death or insanity of the account holder.
- There are specific places on the form where your signature is required. Remember that all joint account holders must sign the closure request form in order to close the account.
- A POA holder is not able to sign a closure request form on their behalf.
- After submitting the account closure form, it usually takes 7-10 business days for the account to be closed.
- There are no fees assessed by the depository for closing an account.
- Demat account closure is, however, contingent upon your having paid any and all outstanding fees associated with the account.
Learn more about the advantages of a Demat Account here.
The benefits of closing inactive Demat accounts
- Though you know the Depository Participant is accountable for protecting the securities in your Demat account, you may have heard of the scandal involving the illegal diversion of securities by certain broking firms. Your confidence in the security of the funds in your Demat accounts may be shaken by occurrences like these.
- Keeping a close eye on your Demat account and maintaining an active account are both effective means of preventing such abuse. This is because dormant Demat accounts are easy prey for dishonest stockbrokers.
- Therefore, if you do not intend to continue trading securities in the near future, it is prudent to close your Demat Account.
- The National Stock Exchange (NSE) has standardized the period for marking an account "inactive" via its circular dated 10 February 2020. If your account hasn't been used for trading in a year, per the circular, it will be considered inactive.
- Keep in mind that your Demat account is exempt from the dormancy or inactivity rules that apply to your trading accounts.
- The reason for this is that a Trading account is needed to purchase and sell securities such as stocks. The stocks and securities you own are stored in a Demat account, which is similar to a bank account. A Demat account cannot be made 'inactive.'
- Demat accounts can only be "frozen" temporarily, which is the only option available within the depository system. Demat account holders have the option of placing their accounts in "freeze mode," which prevents any further debit transactions from being processed, at any time. When the investor knows he won't be making any Demat transactions for a long time and wants to protect his account from fraud, he may do this.
When the owner of a Demat account dies, what happens to the stock in that account?
How to Move Stocks Between Demat Accounts is a Related Read.
- If a Demat account holder passes away and the account was held solely in his or her name, the beneficiary designation will need to be changed to the name of the deceased person's legal heirs.
- If the deceased person's Demat account has a designated beneficiary, that person will receive the account holder's shares or securities and the account will be closed.
A Demat account makes it much easier to invest in the stock market, which can help you reach your financial goals. However, you should probably close your Demat account if you aren't actively investing or trading. If you have more than one Demat account and only want to maintain one, you may need to close the others.
1 Can I deactivate my Demat account alone?
If you no longer require a Demat account, you may close it. Nonetheless, you'll have to close your trading account as well. These two accounts are interdependent; you can't have one without the other.
2 Can I terminate my Demat account electronically?
Your Demat account can't be closed electronically. But in a few easy steps, you can do it in person. You can easily close your account by submitting the appropriate paperwork in person at the DP's office. Your account will be permanently closed within 7-10 business days. As long as there are no outstanding obligations on your end, there will be no costs associated with this.
3 If I don't cancel my Demat account, what will happen?
Your account will go dormant after some time if you don't use it or close it. If you need to use it again, you'll have to get in touch with the DP to have it reactivated. Dormant accounts that aren't closed can become targets for identity theft and other forms of abuse if the account owner isn't careful. Therefore, it may be preferable to have your Demat account closed permanently if you do not intend to use it.
4 How do I find out if my Demat account has been deactivated?
Within 7-10 business days of submitting the account closure form, your DP will send you a confirmation letter to inform you that your account has been closed. You can log in one last time to double-check before permanently closing your account. When an account is closed, the associated Demat account number is deleted and the associated login credentials are no longer valid.
Investment Corporation of India, Limited ( I-Sec) I-Sec's headquarters are located at ICICI Securities Ltd. ICICI Building, H.R. T Address: Parekh Marg, Churchgate, Mumbai, India 400020; Telephone: (022) 2288 2460; Fax: (022) 2288 2470 Nothing above should be interpreted as a recommendation to trade or invest. In no event shall I-Sec or its affiliates be liable for any loss or damage of any kind incurred as a result of any such reliance. Disclaimer: The information provided above is for educational purposes only and is not an offer to sell or solicitation of an offer to buy any securities, financial instruments, or other products.
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