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How to close a Demat account?

03 May 2021 0 COMMENT
  • A Demat Account or Dematerialised Account provides the facility of holding shares and securities electronically. During online trading of shares or other securities, you can buy and store them in a Demat Account. This way, it helps you facilitate trade with ease. A Demat Account holds all the investments you have in shares, exchange-traded funds (ETF), government securities, corporate bonds and mutual funds in one place.
  • In India, National Securities Depositories Ltd (NSDL) and Central Depositories Services (India) Ltd (CDSL) provide depository services. Intermediaries, depository participants or stockbrokers facilitate these services to you as an investor.

Types of Demat Account Closure

There are two different sorts of Demat account closures that you should be aware of before closing your Demat account online or offline:

  • Basic Account Closure: Account holders can close their Demat accounts when there are no holdings, pending payments, or charges. All they have to do is submit a request to the appropriate depository participant. This may be done online and is frequently met with a prompt answer, making the total procedure hassle-free.
  • Transfer and Account Closure: If you still have securities, or charges payable in your demat account, things could get tricky. Before the account in question may be effectively closed, this calls for transferring the pertinent information to another Demat account, which frequently entails several additional processes.

Closing Demat account in case of Account Closure

1.         Visit the website of your depository participant (bank or investment firm) to download the Demat account closure form.

2.         Then accurately complete the form and submit it along with your KYC documentation. Verify the validity of each of the proofs. This stage entails either delivering the paperwork to the nearby DP office or mailing it to the appropriate head office.

3.         If you share the account, all the parties must sign the closure form in front of the DP representative.

4.         Make sure the account does not hold any shares and has no negative balance. Logging into your account will allow you to verify this.

Closing a Demat Account in case of transfer

1.         For intra-depository transfers, you will need an Intra DIS slip and to choose the ‘Off-Market transfer’ option in your Demat account.

2.         Then it is necessary to obtain the original client master list (CML) from the account, which includes the stamp, logo and signatures.

3.         The form filled must then be submitted, including all pertinent information and the names and ISINs of the shares you desire to transfer. Further information will be required along with the target client’s ID.

4.         After this, you must deliver the paperwork in person to your DP’s office or mail them to their corporate headquarters.

5.         A bank representative will verify the self-attested Demat closure form before closure.

Have you ever wondered what you would do when you have multiple Demat accounts, and you want to close one of them or all of them because you are no more interested in investing in the securities market?

  • When you want to close your Demat account, you have to visit the Depository Participant's office and have to submit a Demat account closure form and the necessary documents along with it.
  • You can also download this form from the website of the Depository Participant.

You need to mention the following details along with the Demat account closure form:

 1. DP ID and Client ID

 2. Details such as your name and address – you must remember that the details provided by you on the Demat closure form should match the records available with NSDL or CDSL as the case may be.

3. Reason for closing the account (You may want to close the account voluntarily or due to unavoidable circumstances like death of the account holder or insanity of the account holder, and so on).

  • You have to sign the form at the appropriate places. If you have a joint account, you must remember that all the holders must sign the closure request form.
  • However, the Power of Attorney (POA) holder cannot sign the closure request form.
  • The entire procedure to close the account takes around 7-10 business days after submitting the account closure form.
  • You don't have to pay any charges to the depository at the time of closing the account.
  • However, it would be best if you kept in mind that the Demat account closure is subject to the condition that there should be no dues pending for the account from your side.

Additional Read: Features and benefits of a Demat Account

Why should you close dormant Demat accounts?

  • While you are aware that the Depository Participant is responsible for safeguarding the holdings in your Demat account, you may have heard about the illegal diversion of securities by some broking firms that came to light in the past. These kinds of instances may raise concerns for you regarding your holdings' safety in your Demat accounts.
  • One of the efficient ways to prevent such misuse is to keep an eye on your Demat account and keep your account active. The reason is if you keep the account dormant, such Demat accounts are usually targets of rogue stockbrokers.
  • Therefore, if you think you would no longer want to participate in the securities market soon and do not possess Demat's securities, it is best to close the Demat Account.
  • The National Stock Exchange (NSE), vide its circular, dated 10 February 2020, has standardized the period for marking an account 'inactive'. According to the circular, your account shall be marked dormant if you observe no trading activity for a period of 12 months.
  • Remember, these dormancy or inactivity rules are applicable for your trading accounts and not for the Demat account.
  • The reason is that a Trading account is used to buy and sell stocks and other securities. A Demat account, like a bank account, holds the stocks and securities that you own. There's no concept of marking a Demat account 'inactive'.
  • The only provision available in the depository system is to 'freeze' a Demat account. A Demat account holder can voluntarily request his account to be kept under 'freeze mode', during which no debit transactions occur. This investor usually does this when he does not intend to carry out any Demat transactions in his account for long periods and thus needs to safeguard the account from possible misuse.

You may be wondering how shares held in the Demat account are transferred based on the Demat account holder's death.

Additional Read: How to transfer shares from one demat account to another?

  • In the absence of a nominee, when a Demat account holder dies, where the Demat account was held singly by him/her, the deceased person's legal heirs have to request transmission of the beneficial ownership to their name.
  • If there is a nominee of the deceased person's Demat account, then the nominee will receive shares or securities held in the Demat account, and the Demat account shall be closed.

Conclusion

Stock market investing can help you realize your financial goals, and a Demat account simplifies the process of investing to a great extent. However, if you are not investing or trading and have no use for your Demat account, it may be best to close it. Closing a Demat account can also be necessary if you have multiple accounts and wish to stick to one.

FAQs:

   1. Can I close only the Demat account?

You can close your Demat account if you no longer need it. However, you would also need to close your trading account. Both these accounts work together, and one cannot run without the other.

    2. Can I close my Demat account online?

No, you cannot close your Demat account online. However, you can do so in person in a few simple steps. Just visit the DP’s office and submit the account closure form along with hard copies of all the necessary documents. It will take approximately 7 to 10 business days for your account to be closed for good. There is no fee charged for this, and the process is entirely free as long as there are no pending dues from your end.

    3. What happens if I do not close my Demat account?

If you do not use your account and do not close it either, it will become dormant after some time. In this case, you will have to contact the DP to reactivate it if you need to use it again. Not closing your dormant account when you are not using it can lead to fraud, scams, and other kinds of misuse. Therefore, if you do not wish to use your Demat account, it may be better to get it closed permanently.  

   4. How do I know if my Demat account is closed?

Your DP will send you a confirmation letter to inform you of your account’s closure within 7 to 10 business days of submitting the account closure form. To make sure that your account is closed, you can try logging in once. If your account is closed, your Demat account number will cease to exist, and you will not be able to use your log in details to access your account anymore.

Disclaimer-

ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288 2470.The contents herein above 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. The contents herein above are solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments or any other product.