Demat accounts are a great way for people to trade securities online. In fact, in India, it is mandatory to have a demat account if you want to invest in stocks, exchange-traded funds (ETFs), debentures, derivatives, and other securities.
However, often, people end up having multiple demat open trading account. They seldom use all these accounts to trade. As a result, some of these accounts remain dormant for a long period of time. In such a case, it is advisable to get a demat account closed.
Even otherwise, if you are keen to open demat account, it makes sense to know how to get such an account closed. Two kinds of closures are associated with demat accounts.
The first one is a simple closure of a demat account. When a demat account is not active and there are no pending transactions or holdings associated with it, it can be straightaway closed. This is called ‘simple account closure’.
The second kind of closure happens when a demat account has pending securities. To close such an account, these securities need to be transferred to another account and then the account is closed. This is called ‘transfer and then account closure’.
Steps involved in ‘simple account closure’
a) The first step requires a demat account holder to download the closure form for his demat account from the website of his depository participant (DP).
b) Then, he has to fill this form. Subsequently, this needs to be submitted with all the know-your-customer (KYC) documents. For this, the account holder can either mail all the forms to the head office of the DP or go to the closest branch of the DP and submit the forms himself.
c) What if there is more than one holder of a demat account? In other words, it is in the name of more than one person. In such a case, all the holders of this account have to sign the form to close the account. This has to be done when an official from the concerned DP is present.
d) Before doing all this, a demat account holder needs to check that his account does not have any shares and it does not have a negative balance.
Steps involved in ‘transfer and then account closure’
a) In this case, the first thing that an account holder has to do is to get the closure form for his demat account and the delivery instruction slip (DIS) from the concerned DP. The DIS is used for the purpose of transferring securities from one demat account to another demat account.
b) Then, the account holder has to get the original client master list from the DP to whom he wants to transfer his securities. He also has to get that DP’s signature, stamp, and logo.
c) Then, he has to submit all these forms with the required identity proofs to his current DP so that the DP can close his demat account. For submitting, either the account holder can go to the nearest office of his DP or email the forms to the head office of his DP.
d) In order to close a demat account, it is necessary that a demat closure form is first attested by the demat account holder and then verified by a bank official.
How should you decide about closing a demat account?
If you have multiple demat accounts and some of them are lying dormant, then it makes sense to close those dormant accounts. This is because open demat account attract some charges even when they are dormant.
However, if you have only one demat account, it does not make sense to close it even if it is lying dormant and you have no securities in it. This is because you may decide to invest in securities in future.
There are so many financial assets to invest in, like stocks, mutual funds, ETFs, etc., that it does not make sense to not have even one demat account. Therefore, if you do not have an account, open a trading account today!
