Demat Accounts for Minors: An Overview

Demat accounts are essential tools that allow investors to hold securities such as stocks, bonds, and mutual funds in electronic form. For individuals under the age of 18, a demat account for minors provides an early opportunity to learn about investments and begin their financial journey under the supervision of a parent or legal guardian. This article explains what a minor’s demat account is, its eligibility criteria, required documents, account opening process, benefits, and regulatory aspects to help parents and guardians make informed decisions.

A minor demat account is a special type of dematerialised securities account opened on behalf of a person under 18 years of age. Unlike regular demat accounts, which are held by adults and operated independently, minor demat accounts are opened and operated by the minor's parent or legal guardian. These accounts allow minors to hold and manage securities electronically but with controls and oversight to protect their interests.

The Securities and Exchange Board of India (SEBI) has provided clear regulations governing minor demat accounts as outlined under SEBI guidelines, including SEBI Circular MIRSD/1/2010 dated April 6, 2010, to ensure transparency and protection for young investors. Typically, the parent or legal guardian acts as the primary operator of the account, while the minor is the beneficial owner.

A demat account for minors allows parents or legal guardians to invest in the child’s name and manage it responsibly until the minor becomes an adult. The account is held in the minor’s name but operated entirely by the guardian.

Here are the key eligibility points for opening a demat account for a minor:

• Minor: The applicant must be under 18 years of age at the time of account opening.
  

• Parent or Legal Guardian: The account must be opened and managed by the parent(s) or a legal guardian, who is fully responsible for its operations.
  

• Indian Resident or NRI Minor: Both resident Indian and Non-Resident Indian (NRI) minors are eligible, although documentation and account type may vary.
  

• Proof of Guardianship: If the guardian is not a parent, court-issued or legally valid proof of guardianship must be submitted.

Once the minor turns 18, the account is converted into a standard demat account in their name after necessary verification and documentation. In short, while minors can hold a demat account, it remains under the guardian’s management until they reach adulthood and gain full control of the account.

Opening a demat account for a minor involves verifying both the child’s and guardian’s credentials, making the documents required for minor demat account slightly more detailed than those for a regular account. Proper documentation ensures compliance, security, and smooth operation under guardian supervision.

Documents for the Minor

• Proof of Identity: Birth Certificate, Aadhaar Card, Passport, or School ID Card confirming identity and date of birth.
  

• Proof of Address: Usually not mandatory but may include Aadhaar or utility bills if requested.
  

• Photograph: Recent passport-sized photographs of the minor.
  

• KYC Documents: Completed KYC form for minors as prescribed by SEBI and the Depository Participant (DP).
   

Documents for the Parent or Legal Guardian

• Proof of Identity: PAN Card, Aadhaar Card, Passport, Voter ID, or Driving Licence.
  

• Proof of Address: Passport, utility bills, or a recent bank statement.
  

• Photograph: Recent passport-sized photograph of the guardian.
  

• Bank Proof: Cancelled cheque or passbook copy for linking the account.
  

• KYC Compliance: Filled KYC form for the guardian.
  

• Proof of Guardianship: Legal documents like court orders or guardianship certificates (if applicable).
   

Additional Requirements

• Account Opening Form: Must be completed and signed by the guardian.
  

• In-Person Verification (IPV): Both minor and guardian may need to complete IPV under SEBI guidelines.
  

• Signature Specimen: Guardian’s signature for verification and operational authorisation.
  

• Power of Attorney (POA): Some brokers may request a POA for account management.
   

Ensuring all required documents are accurately submitted helps streamline account opening and maintain compliance with SEBI regulations, enabling the minor to invest securely under guardian supervision.

The process of minor demat account opening online is simple and can be completed digitally under the supervision of a parent or legal guardian. Here’s how to open demat account for minor through a SEBI-registered broker or bank:

1. Choose a Depository Participant (DP):
   Select a SEBI-registered broker or bank that offers the option to open minor demat account. Ensure they support online documentation and KYC for convenience.
   

2. Fill in the Application Form:
   Complete the demat account for minors application form with accurate KYC details for both the minor and the guardian.
   

3. Submit Required Documents:
   Upload scanned copies of identity, address, and guardianship proofs for verification. The process for minor demat account opening online usually includes uploading digital documents.
   

4. Complete In-Person Verification (IPV):
   Verification can be done either physically at a branch or through an online video KYC session, depending on the Depository Participant’s (DP) process.
   

5. Verification and Approval by the DP:
   The DP reviews and verifies all submitted information and documents to ensure compliance with SEBI guidelines.
   

6. Account Activation:
   Once verified, the minor demat account is activated, and login credentials are provided to the guardian for managing the account.
   

7. Link Bank Account:
   The guardian must link a valid bank account to the demat account for fund transfers and settlement of transactions.
   

8. Start Holding Securities:
   After activation, the account can hold shares, bonds, and mutual funds electronically, though trading activities remain restricted until the minor reaches adulthood.

Opening a demat account for minors online offers convenience, transparency, and early exposure to financial planning while being securely managed by the guardian.

A minor demat account functions much like a standard demat account but with specific restrictions and conditions to ensure responsible management. It allows parents or legal guardians to open a demat account for minor investors and hold securities in their name until they reach adulthood.

Here are the main aspects to know:

• Guardian Control: A minor can open demat account only through a parent or court-appointed guardian, who operates it until the minor turns 18.
  

• No Trading Activity: The account can hold securities, but trading (buying or selling) is not permitted until the account holder attains majority.
  

• Investments Permitted: The account can be used to invest in IPOs, mutual funds, and receive corporate benefits such as dividends or bonuses.
  

• Conversion on Adulthood: Once the minor turns 18, the minor demat account is converted into a regular demat account after completing KYC and verification.
  

• Separate Bank Account Linkage: The guardian’s bank account is linked for transactions until the minor takes control of the account.
  

• Regulatory Oversight: All activities are governed by SEBI and depository rules to ensure compliance and transparency.

In essence, a minor’s demat account provides a secure way to begin an investment journey early while ensuring full regulatory protection and guardian supervision

While minor demat accounts allow for holding securities, there are specific restrictions in place to ensure responsible usage and protect the minor's interests. These include:

• Minors cannot trade independently; trading activities are carried out by the guardian on their behalf.

• SEBI regulations prevent minors from executing trades directly to protect them from financial risk.

• The guardian exercises full control over buy and sell decisions.

• Certain brokers may restrict access to derivatives or futures trading for minor accounts.

• Nominee options are available for safeguarding assets.

Once a minor reaches 18 years of age, their existing demat account must be converted into a major account, enabling them to independently manage and operate their investments. This transition ensures compliance with SEBI regulations and transfers full ownership to the account holder.

Here’s how the conversion process typically takes place:

• Re-KYC: The individual must complete fresh KYC formalities in their own name.
  

• Document Submission: Proof of age, identity, and address must be submitted to the Depository Participant (DP).
  

• Transfer of Control: Account management rights and operational authority shift entirely from the guardian to the now-adult investor.
  

• Broker Notification: The investor must inform their broker or DP to update the account status from minor to major.
  

• Account Continuity: All existing investments remain in place, ensuring a smooth transition without disrupting holdings.

Converting a minor demat account to a major account is a necessary step that upholds legal compliance and empowers the investor with complete control and independence over their portfolio.

Demat accounts for minors provide an important gateway for young investors to begin their journey into the financial markets under the watchful eye of a guardian. These accounts offer a secure, convenient way to hold and manage securities while complying with regulatory safeguards. Understanding the documentation, process, and regulatory framework is essential for parents and guardians to facilitate a smooth and secure investment experience for minors.

This content is for informational purposes only and the same should not be construed as investment advice. Bajaj Finserv Direct Limited shall not be liable or responsible for any investment decision that you may take based on this content.