How Many Demat Accounts One can have?
- 28 Mar 2024
- By: BlinkX Research Team
Equity has become a popular investment option in India due to tapering returns from some investment products. Over the years, the number of new Demat accounts has increased, and it is possible to have multiple Demat accounts in India. The Securities and Exchange Board of India and other authorities have not limited multiple Demat account openings. In India, a Demat account is required to trade in financial securities like stocks, bonds, and mutual funds.
A Demat account holds all financial security holdings in dematerialized form and records security transactions and changes in ownership. Banks and Depository Participants provide Demat accounts, and individuals without a Demat account cannot trade securities. They also need a trading account for the interface to buy or sell securities. Let's learn more about what is a Demat account and is it possible for a person to have many Demat accounts.
Can I Open Two Demat Accounts in India?
Yes, you can open multiple demat accounts in India. The Securities and Exchange Board of India, the market regulator, hasn't imposed any restrictions on the number of demat accounts an individual can hold. However, you can't open more than one demat account with the same depository participant (DP). If you already have an account with a particular DP and want to open another one, you'll need to approach a different DP for the new account.
Table of Content
- Can I Open Two Demat Accounts in India?
- Multiple Demat Accounts and Legality
- Limitations on Having Many Demat Accounts
- Things to Know About Multiple Demat Accounts
- Requirement of Multiple Demat Accounts
- How to Check How Many Demat Accounts I Have?
- Advantages and Disadvantages of Multiple Demat Accounts
Multiple Demat Accounts and Legality
It is legal to open multiple Dermat accounts. However, multiple Demat accounts with the same brokerage firm are not allowed. One can open multiple Demat accounts with full-time brokers and discount brokers simultaneously.
Limitations on Having Many Demat Accounts
- Additional costs: Even if the account user is not utilising the Demat account, all brokers will still charge an annual maintenance charge (AMC) for a Demat account.
- Account freezing: If a customer maintains an inactive Demat account for an extended length of time, the broker has the right to freeze the account until the KYC procedures are fulfilled once again.
- Time consuming: An investor needs to routinely keep an eye on all of the transactions made in each Demat account. Most investors, nevertheless, could find it challenging to accomplish this, and they might wind up aggregating all of their inactive Demat accounts. An additional consolidation task turns into a headache.
Things to Know About Multiple Demat Accounts
- A trader can have multiple Demat and trading accounts. There is only one condition in this situation, you cannot open multiple Demat and trading accounts with the same brokerage firm.
- Multiple Demat and trading accounts help in maintaining the investment and trading portfolio differently.
- A trader should be aware of the charges associated with a Demat and trading accounts with different stockbrokers. These charges can include AMC (Annual Maintenance Charge), which the broker charges to maintain the account from the backend.
- If a trader or investor opens multiple Demat and trading accounts, they need to be active on the same day, as brokers freeze the accounts if they are not active for a longer time.
Requirement of Multiple Demat Accounts
Having numerous Demat accounts would undoubtedly make it easier for a trader and long-term investor to keep track of his stock exchange activities. It is handy for investors to maintain trading stocks in one Demat account and other investment instruments in a different Demat account.
Certain traders might like to keep their assets segregated according to their objectives, conditions, stock type, stock exchange, etc. With many Demat accounts, they will undoubtedly be able to handle their stocks more easily.
How to Check How Many Demat Accounts I Have?
NSDL and CDSL websites allow you to check your active Demat accounts by providing your PAN card number. Demat accounts provide you with a place to store and track your investments. Since all investors can own multiple Demat accounts, the NSDL and CDSL provide them access to a master database of all their Demat accounts and statements.
Moreover, the website or app of the DP holding the individual Demat account can be used to view the account status and balance of that account, and your CAS can be used to view the status of your Demat accounts across all DPs.
Advantages and Disadvantages of Multiple Demat Accounts
The following are some of the benefits of opening/owning multiple Demat accounts:
| Advantages of Multiple Demat Accounts | Disadvantages of Multiple Demat Accounts |
|---|---|
| Segregation of Investments: Investors can separate their investments based on their financial objectives by opening numerous Demat accounts. This allows for better tracking and informed decision-making. | Increased Costs: Each Demat account carries its own fees, and having too many accounts can lead to higher expenses, including transaction fees and account maintenance charges. |
| Diversification: Opening Demat accounts with various brokers grants investors access to a wide range of financial products. This diversification helps in spreading risks associated with a single type of asset. | Confusion in Tracking Investments: Managing multiple Demat accounts can be complex. Failing to track investments across various accounts can lead to confusion, potentially resulting in missed opportunities or lost investments. |
| Better Investment Management: Multiple Demat accounts enable investors to efficiently monitor transactions and account statements. This provides a clear overview of their holdings, aiding in making well-informed investment decisions. | Compliance Issues: Adhering to SEBI rules for demat account is crucial for all Demat account holders. Having multiple accounts can lead to compliance challenges, such as delayed document submissions or non-compliance with KYC requirements. |
| Access to Multiple Trading Platforms: Different brokers offer varying trading platforms. With multiple Demat accounts, investors can access and compare various platforms, choosing the one that aligns best with their investment needs. | Risk of Fraud: Maintaining multiple Demat accounts can increase the risk of fraud, including phishing and hacking attempts. It's imperative to implement security measures like two-factor authentication and robust passwords. |
| Flexibility in Trading: Multiple Demat accounts provide investors with greater trading flexibility. For example, if one account is temporarily suspended, investors can continue trading in other accounts without interruption. | Inactive Accounts: Having too many Demat accounts can lead to some accounts becoming inactive. Inactive accounts may incur fines or even be subject to closure after an extended period of inactivity. |
Conclusion
In India, an individual is permitted to have an unlimited number of Demat accounts. Having multiple Demat accounts, though, can be complicated and expensive. To avoid fines, investors must also make sure that all of their accounts are open and in good standing with the law. Investors can manage their investments effectively and gain from the benefits of holding stocks and securities electronically by doing this. Additionally, if you are new to trading and need help understanding it, you may check out the user-friendly BlinkX trading app, which provides online support and direction.
