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Understanding Demat Account Opening Charges

by Uneeb Khan
Understanding Demat Account Opening Charges

Demat accounts come with a fair share of fees even though they make trading and investing, in general, more manageable than before. For the convenience of transactions via electronic means, these charges are a small price. However, it is still financially prudent to know certain aspects of the charges for demat accounts. To learn and understand demat account opening charges and all the other charges involved, read this article below.

Demat Account Opening Charges

A depositary participant also referred to as a Depositary Participant, must be present throughout the process of establishing an account with Demat. They are usually stockbrokers or banks that offer the possibility to open a Demat account with them. On average, your Deposit Protection Plan will probably charge a little fee to start a Demat account. In other cases, the Deposit Protection Officer may offer you the possibility to use a demat account free of charge for a year and charge you a fee for the following year.

In any event, it is advisable to be informed of the initiation fees for your demat account. Ensure that the concession for opening charges does not compromise service quality prior to choosing a Data Protection Provider. 

Demat Account Maintenance Charges

You are also required to pay an annual maintenance fee for the demat account in addition to any charges that you incur when opening a demat account. The amount of charges depends on the DP and the amount of your transactions. The annual maintenance charges (AMC) are levied annually. The AMC of a Demat account may be exempted in some instances. The SEBI has defined a demat account type that is suitable for small investors. It is a Basic Services Demat Account. The annual maintenance fees shall be waived, provided the balance is not less than INR 50,000, in respect of BSDA. 

Demat Account Safety Charges

Before trading became electronic, traders had to keep physical certificates on paper for their shares and other securities. The trader has been given full authority to oversee the security of these certifications. With the introduction of demat accounts, DPs now own the security of trader securities. Consequently, traders must pay the lowest custodian fee based on the quantity of securities in their demat account.

Demat Account Transaction Fees

Finally, the fees charged for debiting and crediting securities into demat accounts are included in the cost. These are referred to as transaction fees, which vary from one DP to another and according to the trader’s brokerage plan. Some DPs levy the transaction fees upon a number of transactions, while others charge them for the whole month.

How to Reduce Unnecessary Demat Account Charges? 

There are a lot of fees involved in opening and using the Demat account, as you can see. Some traders charge for trading in different segments. For instance, you may have to pay  additional charges for f&o margin while trading futures and options with margins offered by brokers. Even though they are negligible in comparison to the benefits of trading with a Demat account, there are methods to lower or even eliminate some of these Demat account fees. 

Assessing account usage is one of the main ways to do this. A Basic Services demat account will be suitable for your purposes if you are not an active trader and use a demat account to store assets rather than conduct frequent transactions. In some cases, the annual maintenance charges for such accounts shall be exempted. For passive traders, this makes it an ideal choice.

The choice of a discount brokerage plan is also available. Instead of charging every transaction, these plans usually include a flat fee for each transaction. For traders making more than one transaction, many brokerage firms offer this plan. You may not be able to take advantage of research analysis or additional services if you choose a discount brokerage plan.

Conclusion

Today, with the advent of technology, trade has become much easier and more accessible than ever before. The way traders have been buying, selling and holding their securities has dramatically changed with the advent of Demat accounts, which made trading more inclusive. The providers of Demat accounts charge various charges in return for providing these services, covering a variety of aspects relating to account security and convenience. To open a demat account with the lowest charges, check out one of the best mobile trading app, Kotak Securities. Remember. keeping up to date with these Demat fees and taking into account how they might be reduced is of great importance for prospective traders. 

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