As per the Securities and Exchange Board of India (SEBI) rules and regulations, you must have a Demat account if you are a retail investor and wish to buy and sell stock market securities. Thus, you need a Demat account for trading all types of financial instruments such as stocks, shares, bonds, debentures, or even mutual funds in an electronic form. The Demat account was made mandatory with an objective to allow tracking, holding and monitoring of the transactions made by investors for financial securities.
You can open a Demat account with the help of a Depository Participant (DP). DPs are banks, online investing platforms, online trading platforms or stockbrokers. The charges for starting a Demat account may vary from one depository bank to another.
Now you can also open online Demat account anytime you want, from the comfort of your home. Some banks allow potential investors to open Demat account without levying a fee.
5 things you must know about Demat account charges
Before you open a Demat account, it is essential for you to know about the fees levied by depository participants on the Demat account.
- Opening Charges: Demat account opening charges vary from one depository participant to another. Some banks do not levy any opening charges for opening a Demat account. On the other hand, online stock broking platform provide a smart and simple trading app which does not levy any charges for opening a Demat account.
- Maintenance Charges: You need not maintain a minimum balance in a Demat account, but you need to pay an annual maintenance charge that ranges between Rs 200 and Rs 1,000. This charge varies from one depository to another. The maintenance charges may also differ depending on the account type you choose.
- Brokerage/Transaction Charges: Different trading platforms charge different brokerage or transaction fees. Thus, whenever the security enters and leaves the Demat account, the depository participant levies a brokerage amount. The security type chosen and transaction value made with the Demat account helps determine the brokerage charges.
- Custodian/Safety Charges: A depository participant can charge a small amount every month, ranging from Rs 0.5 to Rs 1, as a custodian or safety charges on the Demat account to keep the account safe.
5 Demat Charges: A nominal fee, known as a Demat charge, is levied while converting equity and share certificates to electronic form. Demat charges also differ depending on the depository participant you choose.
Take Away
When you choose to open a Demat account in India, there are a certain set of rules and regulations laid down by SEBI. Notwithstanding, it is easy to open an online Demat account with a depository participant using various online investing platforms. As a new investor, you should know about the charges that are levied on Demat accounts before opening an account.