Someone who has never invested in market-linked securities like mutual funds, stocks, commodities, etc. might not know what is demat account. In simple words, a demat account is an account where you can hold your stocks and securities in a digital or electronic form.
Also, you may open multiple demat accounts without any issues as it is totally legal in India. There is no maximum limit assigned to the number of demat accounts you can get. However, for avoiding hassles, it is recommended that you avoid opening more than 2 or 3 demat accounts. One demat account can be utilized for trading regularly whereas the other one can be utilized for holding your securities as an investment for the future. If you open the third one, you can reserve it for investing in futures and options, commodities, etc. However, it is also true that you can trade in multiple market segments from the same demat account as well. The things that you must understand before opening multiple demat accounts are stated below:
DP or Stockbroker
SEBI (Stock Exchange Board of India) allows you to open only one demat account with one DP (Depository Participant) or stockbroker. Therefore, opening multiple demat accounts with the same DP or stockbroker is not allowed.
Demat for NRI
Having multiple demat accounts is possible even if you are an NRI i.e. Non-Resident Indian.
Saving and trading account
Multiple demat accounts can be linked to a single saving and trading account. It would be even better if you have opened all three accounts with a single stockbroker. It is because it would facilitate seamless delivery in and out and minimize the short delivery risk.
IPOs
You cannot apply for the IPO of one company multiple times with different demat accounts.
Cost of a Demat Account
If you own a demat account you will need to pay AMC i.e. Account Maintenance Charges on a yearly basis. Charges to open demat accounts may be waived off by some discount brokers. Therefore, if you own multiple demat accounts, you will have to pay AMC for each of your demat accounts separately. Most stockbrokers waive off the AMC for the first year but start charging it from the second year onwards. Credit/debit transaction fees, rematerialization/dematerialization fees, etc. are some other fees that you need to bear for owning a demat account.
Hassles of an idle account
If you keep one of your demat accounts idle for a long period, your account can get frozen. To revive your account for initiating transactions, you will need to submit your KYC documents again. Also, your PAN and Aadhaar Cards must be linked to your demat account to avoid further hassles while reviving a frozen demat account.
Monitoring transactions of each account
One disadvantage of owning multiple demat accounts is that you would need a lot of time to monitor whether the ordered securities have been credited and sold securities have been debited properly. It is essential to monitor these transactions to prevent fraud. Therefore, it is suggested that you open a demat account only if the stockbroker is registered with NSDL or CDSL.
Consolidating Demat accounts
It is also possible to consolidate multiple demat accounts via off-market transactions. For that, you need to use the DIS (Delivery Instruction Slip) and the securities present in different accounts will be transferred to a single demat account. No taxes or charges are to be paid for this transaction as the securities are transferred to the same owner.
Conclusion
From these above points, it is clear that multiple demat accounts can help you to handle different securities through different accounts. However, the transaction charges and hassles faced while tracking them can also be not avoided. Also, ensure that your demat accounts do not get frozen due to the lack of activity.
