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How Many Demat Accounts One can have?

23 Apr 2021 0 COMMENT

While you can open multiple Demat accounts, you should know the rules.

The depository system was introduced in India by the SEBI through the “Depository Act of 1996”. Since then, Indian investors have to mandatorily open a Demat account to participate in the Indian stock market. Short for Dematerialised, Demat is an account that holds market securities electronically. Depository Participants (DPs) like brokerage companies and banks provide Demat accounts.

What if I have more than one Demat Account?

It is perfectly fine to have more than one Demat account. You can open multiple Demat accounts, but you need to link your PAN number to every Demat account you have opened. The PAN enables Indian regulatory authorities to identify the investment assets associated with you, irrespective of the number of Demat accounts you own.

Additional Read: Have a Demat Account? Look for these four things to avoid losses!

Three basic rules for opening more than one Demat account

  • You can open multiple Demat accounts, so long as the accounts are opened with different Depository Participants. You cannot open more than one Demat account with the same DP.
  • You can open a second Demat account with the same DP, but with a different combination of account holders.
  • If you need multiple Demat accounts, you must open them with different depository participants. So, if you want to open two Demat accounts, you need to open both the account with different DPs.

Additional Read: What is a Demat account? How does one open a Demat account?

Additional Read: Documents Required To Open A Demat Account

Advantages of opening multiple Demat accounts

  • Multiple Demat accounts enable you to segregate your portfolio effectively between short-term and long-term investments.
  • With multiple accounts, you can access varied features such as investment advisory, trading tips, financial consultancy, etc. offered by different brokerage firms. It gives you different views of market conditions to help you make better trading and investment decisions.
  • You can apply for any given IPO only once through a particular Demat account. Thus, multiple Demat accounts increase the probability of securing an allotment of shares in an oversubscribed IPO.

How to open a Demat account? The steps to follow:

  • You need to select and connect with DPs (banks or brokerage firms).
  • You can apply to open an online account through the DPs website or visit the branch/office of the DP.
  • You have to submit self-attested photocopies of your PAN card, and identity and address proof documents (as per the documents mentioned in the Official Valid Documents or OVD list).
  • If you choose the online account opening facility, you can opt for the Digilocker facility offered by the Government of India to fetch your documents or use your Aadhar number to complete the e-KYC process. You should keep your signature image handy to complete the process. Your bank account details can be verified by the penny drop facility by depositing Rs. 1 in your bank account. Otherwise, you can upload a copy of your cancelled cheque, bank statement, or a copy of your bank passbook to verify your bank account details.
  • The DP verifies the account opening form and your documents and then opens the Demat account.

Additional Read: Features and benefits of a Demat Account

Additional Read: Points to remember when operating a Demat Account

Conclusion

The advent of Demat accounts has made trading and investing in the stock markets simpler than ever before. It makes your trading process smooth and quick. Additionally, the leeway of holding multiple Demat accounts also offers its set of advantages. But, you must know that opening multiple Demat accounts has its downside. With every Demat account come the account-opening charges, AMC charges, etc. Plus, if you do not use your account for long, your DP may deem it inactive. And inactive accounts may be frozen by them. Hence, first, evaluate your requirements and open one or more Demat accounts, if necessary.

Additional Read: Myths Facts About a Demat Account

Additional Read: Pros and Cons of Opening a Demat Account

FAQs:

    1.  Is it okay to have 2 Demat accounts?

Yes, it is okay to have 2 Demat accounts. However, you must ensure that they are not opened with the same Depository Participant. The only exception to this rule is when you open a joint Demat account with a different combination of account holders.

Holding multiple individual Demat accounts is allowed when each account is opened with a different Depository Participant.

   2.  Can I have 4 Demat accounts?

Yes, you can hold 4 Demat accounts, provided each of the accounts is opened with different depository participants. SEBI sets no cap on the number of Demat accounts you can hold. However, you must know that holding a Demat account is not free. It comes with a cost - Account opening fees, Asset Management Company (AMC) charges, and so on. And these charges are applicable irrespective of whether you use that account or not. Thus, more Demat accounts mean more maintenance costs. Additionally, if you are not actively using your accounts, your DP may freeze them due to inactiveness.

Disclaimer: The contents herein mentioned are solely for informational purposes and shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon.