It is mandatory for all retail investors to open a demat account charges to trade in shares, bonds, futures and options, debentures, and other financial securities. As a demat account holds securities in electronic format, it also provides convenience while trading and monitoring the holdings. You need to open a demat account online with a DP (Depository Broker). A DP can be a bank, an online trading platform, or a broker who is registered with CDSL or NSDL. The demat account charges will differ as per the DP. Here are some charges you need to know about before going through the account opening process:
Account Opening Charges:
Many DPs don’t charge any account opening fees. However, some may charge a nominal one-time account opening fee and the amount varies from one DP to another.
AMC:
AMC (Annual Maintenance Charges) are charged on a yearly basis and vary between Rs. 200 to Rs. 1000. It also depends on the type of demat account you open. For instance, BSDA (Basic Services Demat Account) usually does not charge any AMC if the investments do not exceed Rs. 50,000. However a nominal fee of Rs, 100 or Rs. 200 will be charged for investments ranging from Rs. 50,000 to Rs. 2,00,000. As a full-service demat account is used for holding securities that exceed the custody value of Rs. 2,00,000, they usually charge a higher AMC. Some DPs don’t charge the AMC for the first year but charge a certain amount as AMC from the second year onwards.
Brokerage:
The brokerage also known as transaction charges was initially charged each time you sell or buy stocks. These days, brokers either charge it only once, either while buying or while selling stocks. The brokerage will differ according to the securities that you prefer to trade with and they also vary from one broker to another. Some brokers charge a flat fee as brokerage irrespective of the trade volume whereas some brokers charge a percentage of the trade volume as brokerage. If you trade frequently, a flat-rate brokerage will be preferable.
Demat charges:
Demat charges refer to the fee that is levied for converting your physical securities into electronic form. The demat charges might vary from one broker to another.
Custodian charges:
Custodian charges are also referred to as safety charges and it is a small amount that is applicable to each security you purchase. The custodian charges are payable to the depositories i.e. NSDL or CDSL. Usually, DPs collect it from the investors when they buy securities. Though it is mandatory for DPs to pay the custodian fee to the depository, some DPs don’t charge it to their customers.
These are the different types of demat account charges associated with opening and handling a demat account. Read the agreement carefully which the DP provides while opening a demat account. It is because you must ensure that no hidden charges are included in the agreement. If you have any confusion or query, cross-check it with the DP before you open a demat account. You must also go through the demat account fees and charges of different DPs to know who is offering the best services at reasonable brokerage rates. The following services are provided by the DPS through a demat account:
Dematerialization of shares:
Physical securities can be converted into digital format through this process. You may even reconvert electronic securities to physical certificates through a process called rematerialization.
Security transfers:
Securities can be transferred from one demat account to another via a DIS (Delivery Instruction Slip).
Consolidated account statements:
You can download a consolidated weekly or monthly account statement from your demat account. You may track all the transactions that you have participated in a particular period by analyzing an account statement.Â
Seamless trading platform:
A seamless online trading platform is provided by the DP. You may invest in various stocks online in real-time to benefit from the fluctuating prices in the stock market.
