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Points To Remember When Operating Demat Account

4 Mins 24 Aug 2021 0 COMMENT


Having a Demat Account that holds your securities safely in a dematerialized and electronic format can be a huge blessing and convenience. The stock market has become more accessible, but you need to know all the tools to operate your Demat Account efficiently and get the most out of it. Let's look at the critical points you need to remember in how to operate Demat Account.

  • The first key factor to remember is to ensure that all the shares you're holding are in the dematerialized form. If you bear physical shares and have requested to convert them into Demat, record the distinctive number of shares along with the folio number of your certificates. Ensure that the certificate details match those of the securities you hold in your Demat account, such as your name, joint holders [if any], and other personal information. Hold on to the Demat Requisition Form [DRF] that you have submitted to the Depository Participant [DP] until you receive your Demat conversions.
  • Ensure that your transaction statement is carefully vetted based on the actual debits and credits in the Demat Account. If you see any discrepancies, inform your DP instantly and escalate to CSDL/NSDL, whichever is appropriate. To ensure you get updates on a real-time basis, register your Demat Account online.
  • Ensure that your Debit Instruction Slip [DIS] is completed accurately when selling shares. Details such as the number of securities, ISIN etc., must be entered correctly.
  • When trading online, your broker may request you for a Power of Attorney [POA] to simplify the trading process. As a completely legitimate action, the POA is permitted under SEBI regulations to streamline and quicken trading processes. However, you are at liberty to refuse that arrangement, and you can choose to sign the DIS on your own.

Additional read: Difference between dematerialisation and rematerialisation

  • When completing the DIS, avoid errors or overwriting. Ensure that the DIS is free of cancellations, misspellings, and other issues that could complicate the transaction. To operate your Demat Account wisely, ensure that the DIS carries your name and the correct quantity of securities you wish to transact. Look into all the numbers, figures and details you enter in the DIS slip. As a safety measure, it can help to cross out empty spaces as an added security measure.
  • Pay all your Demat Account fees and charges by cheque or online bank transfer. It is a good idea never to pay brokerage costs or transaction fees in cash, regardless of how small the amount may be.
  • When looking to sell shares from your Demat Account, ensure that you are only selling those delivered in your Demat Account. The shares must not be blocked by lien, nor must you sell more shares than you hold in your account. Your broker will give you a real-time update on your Demat Account balance before you execute an online transaction.
  • Know the balance in your Demat Account at all times with the help of the Demat Account app, especially when it comes to issuing a DIS. That's because T2T stocks cannot be sold intraday, and any excess sale of shares could result in action loss that could be very steep.
  • When issuing a DIS, the details mentioned in your Trading Account and Demat Account must be the same. For instance, do not attempt to issue a DIS from your spouse's account on the trades that you wish to take. Besides, do not present your shares to other parties.

Additional read: Importance of ESG investing for your portfolio

  • Remember to keep your DIS booklets under lock and key, especially if you are travelling or have to attend to an emergency. At the same time, do not pre-sign your DIS and leave them unattended to avoid mishaps.
  • Engage your Demat Account periodically. For instance, if you have to travel abroad for an extended time, or you cannot operate your demat account on the grounds of compliance, use the facility of freezing your Demat Account for the time frame. This can ensure that no transactions are made from your Demat Account without your authorization. Once you're ready to operate your Demat Account, you can request to de-freeze the account to resume transactions.
  • A good rule of thumb is to evade conducting the offline transfer of shares to another Demat Account. Although SEBI permits the offline transfer of shares without paying capital gains, it is only valid in select cases such as consolidating your Demat Account, transferring shares within family members, bequeathing shares to your heirs, etc. When conducting offline share transfers, remember that the SEBI and the depository maintain close tabs on such transactions. If they feel that the transactions are not genuine, you will be sent a notice to explain the reasons. At best, it is helpful to avoid offline transfers to prevent unnecessary regulatory issues.

Additional Read: Dos and Don'ts for a Demat Account


When shopping around for the best Demat Account for your needs, keep in mind various factors such as the reputation of the brokerage firm, customer service response, investment and trading tools, fees and others. Also, ensure that your Demat Account provides you with the best security measures, including robust encryption methods and safe logouts.


   1. What are the conditions for Demat Account?

To own and operate a Demat Account, the first condition is that your Demat Account should be linked to your PAN. Next, all securities must be held in the dematerialized format. In case you hold physical certificates, these must be converted into the Demat form.

   2. What is the risk of Demat Accounts?

Demat Accounts are reasonably safe since they are monitored by regulatory authorities. Any fraudulent activity will immediately be notified to you. However, there are certain precautions you can take to ensure your Demat Account is safe. Monitor your Demat Account regularly and report any discrepancies you see. Keep your DIS booklets safe so that there is no risk of theft or fraud. In case you are going to be travelling for an extended period of time, freeze your Demat Account to prevent unauthorized transactions.

   3. What is a Demat Account and how does it work?

A Demat Account is an online account that holds your financial securities. It is used to make an account of securities that you buy and sell, similar to a bank account. When you buy shares or other securities, they are credited to your Demat Account. When you sell securities, they are debited to your Demat Account.

Disclaimer: The contents herein mentioned are solely for informational purpose 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.