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Explore how to open and manage a Demat account for a minor in India, including eligibility, documentation, and guardianship rules.
Demat accounts are essential tools that allow investors to hold securities such as stocks, bonds, and mutual funds in electronic form. For minors—individuals under the age of 18—holding a demat account offers an early opportunity to learn about investments and start their financial journey under the supervision of a parent or legal guardian. This guide explores what a minor demat account is, the eligibility criteria, documents required, the 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.
The key eligibility criteria for opening a minor demat account include:
Minor: The individual must be under 18 years of age at the time of account opening.
Parent or Legal Guardian: The demat account must be opened and operated by the minor's parent(s) or legal guardian(s). They assume full responsibility for managing the account.
Indian Resident or NRI Minor: Both resident Indian minors and Non-Resident Indian (NRI) minors can have demat accounts, though the account type and documentation requirements may differ.
Proof of Guardianship: If the legal guardian is not a parent (such as a court-appointed guardian), valid proof of guardianship is mandatory.
Once the minor attains the age of majority (18 years), the account is typically converted into a regular demat account under their name, after completion of due formalities.
The documentation process for opening a minor demat account is slightly more extensive compared to a regular demat account, as it involves verifying both the minor and the guardian. The documents can be broadly categorised as follows:
Proof of Identity: Birth Certificate, Aadhaar Card, Passport, or School ID card. This confirms the minor’s identity and date of birth.
Proof of Address: Although often not required separately for minors, if asked, it can include utility bills or Aadhaar.
Photograph: Recent passport-sized photographs of the minor.
KYC Documents: Completed KYC form for minors as prescribed by SEBI and the Depository Participant (DP).
To open a demat account for a minor, the parent or legal guardian must submit the following documents to establish identity, address, and guardianship:
Proof of Identity: PAN Card, Aadhaar Card, Passport, Voter ID, or Driving License.
Proof of Address: Utility bills (electricity, water, gas, telephone), bank statement, or passport.
Photograph: Recent passport-sized photographs.
Bank Proof: Cancelled cheque or bank passbook for linking with the demat account.
KYC Compliance: Completed KYC form for the guardian.
Proof of Guardianship: Legal documents such as court orders or guardianship certificates, if applicable.
They might also require the following:
Account Opening Form: Duly filled and signed by the guardian.
In-Person Verification (IPV): Both minor and guardian may be required to complete IPV as per SEBI norms.
Signature Specimen: Guardian’s signature for operational purposes.
Power of Attorney (POA): Some brokers may ask for POA from the guardian to manage the account.
Opening a minor demat account involves the following steps:
Choose a Depository Participant (DP): Select a SEBI-registered broker or bank offering demat account services.
Fill the Application Form: Complete the minor demat account opening form along with KYC details for both minor and guardian.
Submit Documents: Submit the required identity, address, and guardianship documents as detailed above.
In-Person Verification: Complete IPV either physically or through video calls, as per the DP’s guidelines.
Verification by DP: The DP verifies the submitted documents and information.
Account Activation: After verification, the demat account is activated, and the guardian receives login credentials to manage the account.
Link Bank Account: For seamless transactions, the guardian links a bank account to the demat account.
Start Holding Securities: Once activated, the minor demat account can hold shares, mutual funds, bonds, and other securities in electronic form.
Helps minors understand financial markets and investment basics
Eliminates risks related to physical share certificates like theft or damage.
Enables minors to receive dividends, bonuses, rights shares, and other corporate actions.
Guardians manage investments, ensuring protection and prudent decision-making.
Shares can be gifted or transferred as inheritance without complicated legal formalities.
Most DPs provide online platforms for real-time portfolio monitoring.
Smooth transfer to a regular demat account once the minor turns 18.
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.
Upon reaching the age of 18, minors must convert their demat accounts to major accounts:
Re-KYC: The now-adult investor must complete KYC formalities independently.
Document Submission: Submit proof of age, identity, and address to the DP.
Transfer of Control: Full control and ownership are transferred to the individual.
Broker Notification: Inform the broker to update the account status.
Account Continuity: Investments remain intact; only operational rights change.
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.
No. A minor cannot open or operate a demat account independently. It must be opened and managed by a parent or legal guardian.
The parent or legal guardian is responsible for all transactions carried out in the minor’s demat account.
There are no fixed regulatory limits on investments in minor accounts, but guardians should invest prudently.
Yes, the guardian manages the account and can trade or sell securities on behalf of the minor until the minor attains majority.
In such cases, a new guardian can be appointed through a court order to manage the minor’s demat account.
Yes. Minors can receive securities as gifts or inheritance, which are credited to their demat account.
