A Demat account is an account where dematerialised shares and securities are stored. Dematerialisation is the procedure involved in converting physical certification of bonds and shares an investor may have to a digital version. The value of the same is allotted in the Demat account.
If one wants to participate in exchanging stock options, they must have a Demat account in order to complete the transaction. Once the account is created, one can choose to buy and sell shares themselves or with the help of a broker. A depository is the organisation that holds on to the securities in various forms such as shares or even mutual funds and government securities. They do so online and are held onto upon the communication received from an investor through a Depository Participant.
However, there are several questions one may ask like, “Can I have two demat accounts” and is there really a need for one? Keep reading to find out.
Opening a Demat Account
The first step is to speak with a registered Depository Participant who is a representative of the bank or a broker. A list of these is available online on websites such as the National Securities Depository Ltd (NSDL) and Central Securities Depository Ltd (CDSL). Opening a Demat account can take close to a week or two and it is important to have a nominee for one’s account. One can speak directly with a bank to find out about the same however, not all banks have the option of opening a Demat account with them and could only be restricted to certain branches.
There are a few charges one must look out for with a Demat Account which differ from one bank to another. Such chargers include an opening charge, maintenance fee, custodian fee and of course a transaction fee. Among all these charges, some banks offer negligible or no opening charges or may even refund the same.
Multiple Demat Accounts
You must be wondering, “can I have multiple demat accounts?” The answer is, absolutely.
An individual can open multiple Demat accounts in their name with different Depository Participants. While opening an account, KYC details need to be given which includes the proof of identity, address and PAN number as required by SEBI.
Things to keep in mind with multiple Demat Accounts
There are no restrictions on the number of demat accounts that a user can hold. When considering opening multiple Demat accounts, there are a few key factors to keep in mind:
1. It is legal to have two or more demat accounts, however, they must not be with the same Depository Participant or Broker.
2. Each individual Demat account will levy individual charges as is expected of each account such as opening charges and annual maintenance charges which will be charged even if there are no transactions being conducted through the account.
3. Having multiple Demat Accounts can be useful if you are an active trader or investor as. having multiple Demat Accounts or trading accounts helps in segregating the investment portfolio.
4. Unused Demat accounts can be frozen and require the KYC details to be redone in order to reactivate the account, hence be aware not to leave the account idle.
5. Keep a keen eye and monitor the monetary balance as well as transactions being carried out in the Demat accounts.
It is absolutely safe to keep multiple accounts with multiple brokers as they do not have control over the holdings in the Demat Accounts. Depositories hold on to the shares and every depository is registered with the SEBI. Keeping this in mind when you ask yourself the question “Can I open 2 demat accounts” yes you can however, there is no compulsion to open multiple Demat accounts in order to trade.