Focusing on the positive growth of the economy, a number of investors are stepping towards the stock market. Every individual looking for stock trading should have a fair knowledge about demat account as it is a mandatory account to trade in the share market.
Dematerialized account, which gained popularity as a demat account, is an electronic record of the ownership of the investor’s financial assets. Demat account has been a point of discussion because of its numerous benefits that have made the stock market easily accessible.
Your demat account will take care of your securities. Demat services involve different types of charges. You can open a demat account along with trading account online with a discount broker for low brokerage trading. Let us look at whether you need to put up a minimum amount for demat accounts and charges you need to pay for demat services.
Minimum amount to open a demat account
A demat account is an online account that stores different types of securities electronically. Demat account rules have been changed over the years, and as per the mandate of SEBI, depository participants (DPs) offer a basic demat account for free. Depending on the depository participant you choose and the types of securities you want to store, demat account opening charges may vary. To encourage retail participation in the stock market, DPs charge minimal demat opening charges.
Minimum balance to maintain demat account
You can open a demat account without owning any security. You need not meet any minimum balance requirements. Your demat account will remain active whether you store stocks in it or not.
General Demat Account Charges
- Annual Maintenance Charges (AMC)
This annual fee is paid to the depository participant by an investor to maintain the demat account and securities. A basic demat account that holds securities of up to Rs.50,000 does not attract AMC. Besides demat holding value, AMC also depends on the number of debit/credit transactions you make using it. Many DPs have waived off AMCs for the first year of opening a demat account for healthy competition in the brokerage industry.
- Safety/Custodian Charges
As demat accounts have taken over all your worries about the security of your assets, it involves safety charges. It is an annual charge on the account levied by the DP. However, if a company has already paid these charges, the DP will not charge any cost as safety charges.
- Transaction Fee
It is the fee charged by your DP on debit or credit of securities in your demat account. It is a nominal fee charged monthly. You can find many DPs waiving off credit transaction fees and charge for debit transactions only.
- Dematerialization/Rematerialization Charges
Dematerialization is the fee applicable to converting physical share certificates to electronic form, and rematerialization is applicable to converting electronic shares into physical shares. As a middleman, DPs forward the conversion request to the registrar and complete the process. Most of the cases are about dematerialization. It is a nominal fee charged by the DPs.
- Pledge Creation Fees
One of the key reforms in the margin trading rules is the margin pledge. This charge is related to margin trading. When a trader needs funds, they can utilize the margin trading against cash or stocks by creating a margin pledge separately. If a margin trader collateralized the stocks held in the demat account, it will involve a pledge creation fee.
- Modification/Updation Fee
Suppose you have changed your resident or there is any change in your registered ID or phone number. In the absence of electronic securities, you would have to contact every company to register new details. Thanks to the demat account, you just need to update it with your DP, and it will be updated in the companies’ records automatically.
- Delivery Instruction Slip Fee
Delivery Instruction Slip (DIS) is required to transfer your securities from one demat account to another. DPs charge for this DIS book.
- Consolidated Account Statement Fee
Investors receive demat account monthly statements. They can request for a consolidated Account Statement (CAS) for a fee. Many investors demand CAS for convenient insights into their investment’s performance.
This is all about minimum balance and demat charges that an investor should consider while applying for a demat account.