Can I have Multiple Demat Accounts?
Suppose you are all set to trade in stocks and other liquid securities. You then approach your bank to get a Demat account since they provide one. The formalities are done, and you take your first step in the share market as a novice investor. After a few days, you come to know another institute (depository participant) that offers many additional services with a Demat account. Your bank provides all the essential services, but the other institute also provides investment services and free learning modules to the Demat account holders. Your association with your bank lets you trust it, but at the same time, the new facilities grab your attention. At this point, you might have a doubt- Can I have multiple Demat accounts at once? Let's find out by understanding things from the basics.
What is a Demat account?
A Demat account is an account where Dematerialized shares and other securities are stored. It makes trading and investment simple for everyone and keeps all the Demat-linked assets in one place. A Demat Account holds the following list of investments: shares, exchange-traded funds (ETF), government securities, corporate bonds, and mutual funds.
Additional Read: Top Features & Benefits of Demat Account
How does a Demat Account Work?
A Demat account works in the same way as a savings account. However, while a savings account allows you to store cash electronically with a bank, a Demat account will enable you to store securities with NSDL or CDSL affiliated depository participants (DP). In other words, it works as a repository for your stocks and other securities. When you purchase shares or securities, they get credited to your Demat account, and when you sell them, they get debited from your Demat account.
However, you must know to buy and sell securities; you need a Trading account. The Trading account is linked to your Bank account and Demat account. It acts as an intermediary account executing the buy/sell transaction and leading to a consequent debit/credit of securities/money from/to your Demat/Bank account. This is why many brokers and banks offer a ‘3-in-1’ account. A 3-in-1 account includes all the necessary accounts needed for the trading process, namely, a Bank account, Demat account, and Trading account.
Additional Read: Understanding the Basics of a Trading Account
Additional Read: How to Choose Best 3-in-1 Demat & Trading Accounts in India
Additional read: ICICI Direct- Trading shares using Demat account
Additional Read: Who can open a Demat Account? Know the Eligibility Criteria
Can I have multiple Demat accounts?
You can open multiple Demat accounts with different Depository Participants. While opening each Demat account, the KYC documents need to be submitted, like PAN number, address, and identity proof directed by the depositories and the securities market regulator SEBI (Securities and Exchange Board of India.
There is no limitation on holding more than one Demat account. You are legally allowed to have two or more Demat accounts; however, they must not be with the same broker.
However, having multiple Demat accounts means more maintenance costs. Each Demat account will levy charges such as opening fees, Asset Management Company (AMC) charges, etc. These will be charged even if no transactions are recorded throughout the year. Moreover, you will need to keep an eye on and monitor the activities in your Demat account now and then.
Additional Read: Checklist of Demat Account Charges
Uses of having Multiple Demat Accounts
Having multiple Demat accounts comes with its share of benefits too, if you are both an active trader and an investor for the long term. Here are some of the uses of holding multiple accounts,
Helps to Segregate your Portfolio
You can segregate your portfolio more effectively with multiple Demat accounts. You can also bifurcate your investments duration-wise with the help of more Demat accounts. For instance, maintaining separate Demat accounts for short-term trading and long-term investments.
Provides access to Research from Multiple Brokers
Having multiple Demat accounts with distinct stockbrokers and banks gives you access to valuable research and market insights from many credible sources. Moreover, each of them may present data from different perspectives. It can help you make more knowledgeable and accurate trading and investment decisions.
Increases your chances of securing allotment in IPOs
Shares in an over-subscribed IPO are allotted randomly to Demat accounts of investors. If you have multiple Demat accounts, you can apply for the desired IPO through several accounts. Every additional application from each distinct Demat account increases your probability of securing share allotment in IPOs.
Additional read: ICICI Direct- How many Demat accounts can one have?
Although opening multiple Demat accounts in India is possible. However, while considering having multiple Demat accounts, it may be beneficial for you to have more than one Demat account. Looking at your specific circumstances, you should limit the number of Demat accounts you have to ensure that you do not have a cluttered investment portfolio. In addition, if you are a frequent trader or investor, keeping track of multiple Demat accounts can be difficult. As a result, you should carefully consider the requirements before opening multiple Demat accounts.
Additional Read: Things to check before opening a Demat account
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. Investments in the securities market are subject to market risks, read all the related documents carefully before investing. 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 are solely for informational and educational purposes.