What are DP Charges?

The full form of DP Charges is Depository Participant Charges. DP charges are applicable in online share market investments. However, many investors often overlook them. DP charges mean, Depository Participant Charges and are a part of the Demat account, which holds shares in digital format. 

In India, two types of Demat accounts are provided by brokers: CDSL (Central Depository Services Limited) and NSDL (National Securities Depository Limited). Regardless of the broker, the Demat account operates under one of these depositories, ensuring the safety of investments. DP charges are charged by the two depositories to maintain the security of the investments. This blog will help you to understand “what is DP charges in Demat account” in detail.

DP Charges Meaning

When you sell a stock, the broker or depository participant asks CDSL or NSDL to release the stock you want to sell. Once the depository releases the stock and it's ready for sale in your trading account, a fixed amount is deducted from your account as DP charges. DP charges full form is Depository Participant charges. These charges are then split between CDSL/NSDL and your broker. 

Unlike other fees, such as brokerage or stamp duty, DP charges are set at a fixed rate. This means whether you sell one share or a thousand shares, the fee remains the same. Interestingly, these charges don't appear on the contract note sent by your broker. Instead, they are added to your account ledger.

Some investors believe that BTST (Buy Today Sell Tomorrow) trades are exempt from DP charges. However, this is not true. These charges apply regardless of the type of trade you make.

How Much Do You Pay as DP Charges?

Depository Participant charges typically include account opening fees, annual maintenance charges, and transaction fees, which vary with different brokerage firms and service types. Click here https://blinkx.in/charges to know more about our DP chargers. 

For example, if an investor sells 100 shares of XYZ from their Demat account on a Monday, they would pay INR 12.5 plus 18% GST for the transaction. If the same investor sells 100 shares of XYZ and 100 shares of ABC on the same day, they would pay INR 12.5 plus 18% GST for each stock, resulting in a total DP charge of 25 plus 18% GST. This fixed structure simplifies the calculation process and ensures transparency in fee assessment. 

Who Levies and Collects DP Charges?

NSDL, CDSL, and other depository participants in India charge DP fees. If you sell a stock on the NSE, you'll pay NSDL as part of the DP charges. When you sell a stock on the Bombay Stock Exchange (BSE), a part of the charges goes to the CDSL. A Depository Participant acts as an intermediary between investors and NSDL/CDSL.

In addition to stock DP charges, investors pay four types of fees to DPs - Demat account opening fees, Annual Maintenance Charges (AMCs), transaction fees, and custodian fees.

Depository-Wise DP Charges

Here are the Depository-wise DP charges.

1. National Securities Depository Limited (NSDL)
   The NSE and Unit Trust of India (UTI) jointly promote NSDL as a depository. The NSDL performs various functions through its Depository Participants, clearing corporations, share transfer agents, and other entities. A Depository Participant is also called NSDL's business partner. Customers and clearing corporations can only access DP services if they are members of NSDL. Various NSDL services can only be accessed through DPs. However, you must first open an account with the DP. As DP charges, the NSDL charges INR 17.50 (13+4.50) per sell transaction per day.
2. Central Depository Services India Limited (CDSL)
   Public sector banks, as well as the BSE, promote CSDL. DPs act as intermediaries between you and the CSDL. Your account balance is managed and recorded by CSDL using DPs. DPs provide you with account statements at regular intervals with information about your transactions and securities held.

Why Do Depository Participants Levy DP Charges?

Even though DP charges are higher for investors, they're essential for DPs to stay in business. DPs need to register with NSDL and CDSL before offering Demat account opening services to customers. It costs them a lot to pay CDSL, NSDL, and SEBI for this.

Financial institutions or stockbrokers who want to be DPs have to pay SEBI fees, application processing fees, training fees, refundable security deposits, software maintenance fees, insurance premiums, connectivity fees, and internet registration fees. By charging investors, DPs can recover the upfront costs of obtaining their licence from SEBI, NSDL, and CDSL.

What Are DP Charges Used For?

Depository Participants impose charges to recover the cost of offering Demat services to investors. They offer a range of Demat account-related services including the opening and maintenance of Demat accounts, processing of transactions, provision of statements, etc. Certain charges are levied for these services that covers a range of costs, including salaries, infrastructure, technology, and regulatory compliance. 

Additionally, Depository Participants make investments in their infrastructure and technology to boost the effectiveness of their Demat services. For instance, they might invest in technologies that enable mobile transactions and online account opening. These investments need a large amount of capital, and DP charges help in recovering these costs. Click here to learn more about the redemption of debentures.

Different Types of DP Charges

DP charges are crucial for investors if they want to effectively manage their investments and understand the cost structure of their Demat account. The following are different types of DP charges listed.

1. Account Opening Charges

• Meaning:  Depository participants impose account opening charges when a new Demat account is opened using a Demat account app. 
• Charged amount: The Demat account DP charges can be a few hundred to several thousand rupees and vary from DP to DP. 
• Purpose: The cost of providing account opening services is usually included in the account opening charges. It includes charges for confirming the investor's identity, processing the application, and issuing the Demat account number.

2. Account Maintenance Charges

• Meaning: This charge acts as an annual fee for keeping the Demat account active.
• Charged amount: This cost varies from DP to DP and is often imposed annually. 
• Purpose: The expense of providing services like maintaining the Demat account, updating the account holder's information, sending account statements, and offering customer support is covered by the account maintenance fees.
• Example: Consider an investor, who maintains their Demat account with DP Company X in India. Company X charges an annual account maintenance fee of ₹2000 to cover the costs of services like updating account information, sending account statements, and providing customer support. This fee ensures the smooth functioning of an investor’s Demat account throughout the year.

3. Transaction Charges

• Meaning: DPs impose transaction fees for handling transactions in a Demat account. 
• Purpose: Transaction charges are imposed for a variety of transactions such as purchasing or selling securities, and transferring securities between Demat accounts.
  Example: An Investor, with DP Firm A, conducts transactions. They pay ₹20 for buying 200 shares of Company X and ₹25 for selling 150 shares of Company Y. Transferring 100 shares of Company Z costs ₹15, and buying 300 shares of Company W incurs a fee of ₹30. In total, the Investor pays ₹90 in transaction charges to DP Firm A for these activities.

4. Depository Fees 

• Meaning: The depository, a central organisation that keeps securities in electronic form, charges depository fees. The DPs are subject to depository charges, which they then pass to investors. 
• Purpose: These fees pay for the maintenance of the communication networks, servers, databases, and other depository infrastructure.

5. Custodian Charges

• Meaning: Custodian charges are imposed by those who manage and safeguard securities for investors as custodians. Institutional investors including pension funds, insurance firms, and mutual funds levy custodian services. 
• Purpose: Custodian fees pay for the cost of keeping the securities secure, handling transactions, and giving investors reports.
• Example: Let's consider a pension fund, Investor Mr X, employing the services of Custodian Firm B to safeguard its securities. Custodian Firm B charges a fee of 0.1% annually on the total value of the securities held. If Investor X has securities worth ₹1,000,000, the annual custodian charges would be ₹1,000 (calculated as 0.1% of ₹1,000,000). These charges cover the costs of ensuring the security of the investments, managing transactions, and providing regular reports to Investor X.

6. Charges For SMS And Email Alerts 

• Meaning: DPs charge investors for sending SMS and email alerts for certain Demat account-related events.  For instance, investors may receive alerts regarding the debit/credit of securities, balance statements, and transaction statements. 
• Purpose: These notifications, which are billed either regularly or annually, assist investors in keeping track of their Demat account.

BlinkX Offers a Variety of No-Frills Broking Services

BlinkX offers investors the opportunity to save more by waiving off the charges associated with opening a Demat account, making it easier and more accessible to start investing in the stock market. Its competitive Depository Participant (DP) charges ensure that investors can maximise returns without incurring excessive fees, allowing them to manage their investment portfolios and achieve their financial goals.

Conclusion
DP charges are essential for investors to manage their investment portfolios and navigate the stock market. They cover expenses for maintaining accounts, processing transactions, and ensuring regulatory compliance. These charges are fixed and vary between Depository Participants like NSDL and CDSL. Understanding these charges helps investors navigate the stock market more effectively and optimise their investment strategies. DP Charges refer to fixed transaction fees irrespective of the quantity sold. Learn more about DP charges and how to avoid them with a reliable Trading App.