Investing plays an essential role in harnessing the potential of your savings. Many options are available, and the stock market is a popular avenue among them. However, it is mandatory to have a demat account if you want to invest in the stock market.
A demat account simplifies managing and trading by enabling you to hold your shares electronically, eliminating the need and risk of storing them physically. However, under certain circumstances, it can turn into an inactive demat account.
An inactive account can transition into a dormant one, resulting in financial setbacks. While you may think monitoring a dormant account may be pointless, doing so is important. Read on to learn more about dormant demat accounts, why you should monitor it regularly and more.
A demat account becomes dormant when you do not use it for an extended period, as specified in the SEBI Guidelines for dormant demat accounts. Generally, the period varies depending on your depository participant (DP) but may go up to 12 months.
Here are the reasons why a DP may declare your demat account as dormant:
You do not make any debit or credit transactions through your demat account for a specific period
You do not make any transactions after it has been declared an inactive account
It is essential to remember that despite the dormant status, your account remains operational, and your ownership is not terminated. You can choose to reactivate the account at any point in time.
Check out why monitoring your dormant demat account at regular intervals is essential.
Dormant demat accounts have a higher risk of fraudulent activities due to the unawareness of the holders.
Fraudsters take advantage of this situation and use your dormant demat account to transact without your permission. This can cause financial setbacks, which may be avoidable with regular intervals.
Another reason is checking the account charges. You might remain uninformed about the charges associated with your account. This can cause your account to become overdrawn, causing financial losses.
Assets in your dormant demat account might include items that may have depreciated. In case you fail to convert these assets into cash at the right time, you may see a substantial fall in the value of your assets.
Here are the steps that you need to follow to reactivate a dormant account.
Step 1: Check with your DP to confirm your account is dormant
Step 2: Get a reactivation form and provide the necessary document proofs
Step 3: Clear any outstanding dues and complete the reactivation process
Step 4: Maintain the activity in your demat account by logging in at least every 6 months and monitoring its status
As you can see, monitoring a dormant demat account at regular intervals is essential to track various components of your account. If you don’t intend to use your demat account for a long period of time, you can temporarily freeze it.
A temporary freeze renders the account inaccessible for making any transactions, therefore safeguarding it against potential fraud. You can unfreeze the account when you want. Remember that the process may be different depending on your DP.
You should also invest in multiple avenues to mitigate the risk. Check out various investment options available on Bajaj Markets. With an online process, you enjoy zero account opening charges to help you invest without any hassles.
Your Demat account can be declared as a dormant demat account if you do not make any transactions using your account within a range of 11 months to 5 years. However, it is essential to know that this duration may vary with different depository participants.
Yes, dormant demat account charges and fees include annual charges as well as maintenance fees. The amount will vary depending on the DP you have.
Yes, a dormant demat account and an inactive demat account are different. A demat account is first declared inactive and then becomes dormant. The period for this transition depends on DP and is generally mentioned in the agreement signed while opening your account.
Yes, you have the option of deleting your demat account permanently. To do so, ask your stockbroker for a demat account closure form. Then, fill out the form and submit it to close your account.