Opening a demat account and trading account signifies your entry into the realm of financial markets, enabling you to invest in a variety of securities such as stocks, bonds, mutual funds, derivatives, and commodities. These accounts serve as gateways to direct access to these securities, enabling you to trade freely and diversify your investment portfolio.
Nonetheless, it's crucial to regularly check your stock holdings, fund balance, and stay informed about bonus shares and dividend payouts by logging into your demat account frequently.
If you haven't made any trades (buying and selling) in your demat account for a consecutive 12-month period, the account will become dormant due to inactivity.
Demat accounts: Everything you should know about the annual maintenance charges on them
The term inactive account refers to an account wherein no trades have been carried out in the last 12 (twelve) months across all exchanges. In recent times, there has been a significant surge in demat account openings, largely driven by the booming stock market. Despite the increase, the number of active demat accounts remains relatively low compared to the total count, which currently stands at 14 crore in India.
In this article, we will explore why it is necessary to monitor dormant demat accounts, and how to reactivate a dormant demat account.
What is a dormant demat account?
A dormant demat account is a dematerialised account that has not been used for a year. It could be because the investor has not made any transactions or the account has been inactive. The account is still active, but there are no recent trades taking place.
A dormant demat account is different from a closed demat account. The demat account holder may reactivate the account at any time.
Also Read: What is the difference between a demat and a trading account? MintGenie explains
It is important to monitor dormant demat accounts, as they may be vulnerable to fraud or misuse. In such cases, the investor needs to be vigilant and take proactive steps to secure their account.
How do I reactivate a dormant demat account?
Reactivating a dormant demat account is not a difficult process. The first step is to check with the brokerage firm or depository participant (DP) to see if your account is actually dormant. This usually depends on the maintenance fees you pay and the length of time that the account has been inactive.
If your account is indeed dormant, the next step is to get a reactivation form from your broker or DP and submit it along with the necessary documentary proofs, such as a PAN card, passport, and so on. You may also need to settle all pending maintenance dues, and you may have to pay a reactivation fee to the DP unless the value of the shares in your account is very high.
Also Read: What are the charges associated with a demat account?
Once the reactivation process is complete, it is important to keep your demat account active. This can be done by logging in to your demat account once every six months to stay informed about its status and to check your holdings.
FAQs
Do I need to pay additional charges to reactivate my demat account?
The policy regarding additional charges for reactivating your account varies among depository participants. Some may impose an extra fee for reactivation, while others may not.
What happens to the funds in my account if it becomes dormant?
If your account becomes dormant and contains funds, your depository participant will credit those funds to your linked bank account. DPs typically follow a running account settlement for their clients, meaning that any unused funds in the demat account must be returned to the bank account at a specified time interval.
How often should I open or use my demat account to avoid it becoming inactive?
To avoid your demat account becoming inactive, it's advisable to conduct at least one trade within a 12-month period across all exchanges where you hold securities.
What happens to the securities in my demat account if it remain inactive?
If your demat account remains inactive for an extended period, the securities held in the account remain safe and secure. However, you won't be able to conduct any transactions until the account is reactivated.
Will I still be eligible to receive dividends if I don't regularly open my demat account?
Yes. You will still be eligible to receive dividends even if you don't regularly open your demat account. Dividends are typically credited directly to your linked bank account, regardless of the activity in your demat account.
Are there any consequences if I fail to reactivate my demat account after it becomes inactive?
If you fail to reactivate your demat account after it becomes inactive, you may face restrictions on trading and accessing your securities. Additionally, you may incur penalties or charges for account reactivation, depending on your depository participant's policies.
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