Simple steps towards the closing of inactive Demat accounts

New Delhi: A Demat account is an account that you must have to hold stocks and securities in digital form. It is not much different from a bank account, but instead of holding money, it enables the purchase, holding and sale of financial instruments including stocks, bonds, mutual funds, exchange-traded funds and government securities.

Depository participants (DP) hold Demat accounts. The participant is in charge of maintaining the account, handling transactions, and ensuring regulatory compliance. As an investor, are you looking to close your Demat account(s)? If yes, the process is simple as opposed to the myth against the alleged complexities in closing these accounts. 

Why get rid of inactive Demat accounts?

With the advent of online trading, Demat account(s) have become a must-have for investors. However, if you are not operating in the stock market, it would serve best to close them than render them inactive and keep paying for operational charges. It is important to close these accounts once they are dormant and inactive. Not doing so in time can have myriad adverse effects. First of all, an inactive Demat account can reduce the value of your investment. Your account is inactive, so market changes and updates will not be reflected in your account.

Second, your DP may charge you for not making any transactions. Finally, keeping and maintaining such inactive account(s) can cause security problems because it renders you vulnerable to cyber threats and other fraudulent activities.

How to close an inactive Demat account?

Closing an account with a DP is a straightforward process if there are no balances or other holdings to transfer. The following steps are required for successful completion:

Step 1: Download the closure forms from your DP’s website and read the instructions and fine print thoroughly. This form includes in detail necessities as well as the method for completion and submission.

Step 2: Attach photocopies of the necessary KYC documents, as well as an attested signature as a part of the verification process. Also, provide information about your account, customer ID, and brokerage. Check that the customer ID for the brokerage account and the DP’s identification number. Then, match the other details on the form and those associated with the account.

Step 3: If the account has multiple users or owners, all owners must sign the closure document. This is also true for their respective KYC documents. Get in touch with your broker to find out how to attach, attest, and submit the form correctly.

Step 4: Once everything is in place, submit the closing form along with all the required documents. The account participants will then process the closure and close the account gracefully.

Step 5: You will receive a letter from the DP confirming the completed form within a week to 10 days of submission. You can then log in to your Demat account and confirm if your account number has been disabled.

Closing an inactive Demat account is essential to securing your investments and avoiding unnecessary fees. You must follow the graduation process carefully and understand all the necessary formalities to successfully close the account. Closing Demat accounts, when inactive, is beneficial in terms of security, cost savings and avoiding potential losses due to account inactivity.