A Demat
Account is similar to a bank account. While the bank account holds your money,
a Demat account holds your shares in a dematerialised format. A Demat
Account allows you to not only store shares but bonds, mutual funds, and Exchange
Traded Funds as well. To open one is quite simple.
You need to find a Depository
Participant (DP) first, then learn all about the Demat Account charges levied by them before you choose one. While
you can either go for the no frills-Basic Services Demat Account (BSDA) or the
regular one, make sure you keep an eye on the following charges before you
decide on a DP.
1. Account Opening Charges
When you
open a Demat Account with a DP, there is a chance you will need to pay a fee
for all the process charges and costs related to opening your account and
activating it. That’s known as an Account Opening Charge.
While some
DPs forgo this charge, there are others which levy a nominal charge before
activation of your account.
2. Annual Maintenance Charge (AMC)
As the name
suggests, DPs levy an annual maintenance charge on customers for maintaining
their Demat Account. It’s also known as folio maintenance charge. The rate
differs from one DP to another.
If you own a
BSDA and your holdings are less than INR 50,000; there is no AMC levied. It the
value of holdings is between INR 50,001 and INR 2, 00,000; you need to pay an
AMC of INR 100 per annum.
3. Transaction Fees
DPs levy
this fee on a monthly basis. It’s a fee on the transactions (debit and credit)
of shares and securities in your Demat Account. While some Depository
Participants charge a flat fee, some charge a percentage on each transaction.
Some DPs
levy charges on the debit of securities while some levy it only when securities
and credited. It all depends on the DP.
4. Rematerialization /Dematerialization
A Demat
Account holds your securities in electronic format. Now, there are occasions
when you might need to dematerialise your securities from the electronic format
back into a paper format; this process is rematerialisation. There are other
occasions when your hold securities in paper format and wish to convert them
into electronic format. This process is dematerialization.
DPs levy
charges on both these processes.
As you read,
different DPs have different charges. You should read up on these charges and
compare them before signing up with one particular DP.
