On 6th October 2022, the Securities and Exchange Board of India (SEBI) declared the execution of a ‘Demat Debit and Pledge Instruction’. In its expanded scope, this facility is now required to transfer securities, such as mutual funds and shares on the stock market.
This action replaced the existing Power of Attorney (PoA) document and ensured better security. This step was taken to reduce instances of brokers misusing the PoA. By executing the DDPI, your securities and your demat account are more secure, as no debits can take place without placing a sell trade.
Read on to know what a DDPI is, its features, why you should opt for it, and more.
Demat Debit and Pledge Instruction or DDPI is an agreement between the Demat account holder and the stockbroker/depository participant. This agreement allows the DP to make debits from their client’s Demat account.
Previously, you had to give the PoA for the same or sign the delivery instruction slip. Now, by signing the DDPI, you can give the broker the consent to make a trade on your behalf. However, with this facility, brokers can take only limited actions related to your securities.
Here are some actions that stockbrokers can perform after the execution of a DDPI in a Demat account:
They can transfer shares to the stock exchange from your Demat account after you have executed a trade
They can pledge or re-pledge securities in favour of a trading or clearing member to meet the margin requirements
They can transfer mutual fund units from your Demat account
They can also transfer your shares available in open offers (i.e., buybacks/delisting/acquisitions) on the stock exchange
A PoA and a DDPI are not the same. A PoA is a document that gives a broker permission to make a debit from the client's Demat account. However, after a few instances of misuse, SEBI introduced the DDPI in Demat accounts to replace the PoA.
On the execution of this facility, the DP can debit your shares from the account once you have executed the sell trade. The main difference between the two is that the DDPI allows brokers to make transfers and pay-in obligation settlements for the trades you have executed.
In addition, while you need to get the PoA documents stamped physically, the DDPI requires only digital stamps. This makes the procedure more straightforward and quicker.
You can also opt for a DDPI if you do not yet have a Demat account and are looking to open one. On the other hand, you can only execute a PoA after you have opened your Demat account. Lastly, the PoA will remain active until you revoke it on your Demat account.
Here are a few benefits you can enjoy when you opt for a DDPI:
It is a time-saving practice that allows your broker to take action on your behalf
It reduces the risk to your Demat account by avoiding a possible misuse of the PoA by the broker
Keeping these facts in mind, you can choose if you want to execute a DDPI on your Demat account. If not, you can also submit an Electronic Delivery Instruction Slip (eDIS) each time you plan to sell any of your stocks from your demat account.
However, if you have not yet opened a Demat account, trading on the stock market is not possible. With a Demat account, you can track and maintain your securities effortlessly.
To get started, open Demat account on Bajaj Markets to enjoy the lowest brokerage fees, no annual maintenance charges, and other benefits.
This is a one-time charge and the cost varies across brokers. You do not need to pay a DDPI fee for every Demat account transaction.
Yes. The DDPI in a Demat account is a safer option than an executive POA.
No. A DDPI is an optional procedure that you can opt for instead of a PoA. However, if you do not opt for a Demat Debit and Pledge Instruction, then you must sign a delivery instruction slip. This allows your broker to make any sale transaction from your account.
You can activate the DDPI online for your Demat account by logging in and filling out the DDPI activation form.