What is PoA in Demat Account

What is PoA in Demat Account

Stock market investment is a great way to financially grow as there are many different options available like buying debt equity or hybrid funds. As technology has evolved, you don't even have to go to a broker's office or stock exchange. You can do it all online! When you invest online, you do it through a broker, but the broker can't make decisions for you unless you give them something called power of attorney (PoA).

By providing power of attorney, the trading process is made easier as they don't have to ask you for permission every time they want to make a trade. It can be risky as well as you are giving them more control over your money. In this blog learn about what is poa in demat account, its types, features, and benefits. 

What is a Power of Attorney?

A Power of Attorney (PoA) is a legal document where one person, called the principal, gives another person, known as the agent, the authority to act on their behalf in certain or all financial and legal matters. In simple terms, it gives the agent the ability to take care of things, decide what to do, and run the principal's business. PoA in the share market is a  regular and safe practice in India that gives the broker some authority, despite early worries about privacy and security. 

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Table of Content

  1. What is a Power of Attorney?
  2. What are the Different Types of PoA?
  3. Is it Mandatory to Execute a Power of Attorney in Demat Account?
  4. Precautions one should take before signing a PoA
  5. Features and Benefits of the Demat Account with BlinkX

What are the Different Types of PoA?

There are two different types of PoA: 

  1. General Power of Attorney:

    In this type of authority, the appointed agent gets significant authority to handle a variety of financial and legal matters on behalf of the principal. With a significant power of attorney, the agent gets to decide and act on behalf of the principal in a variety of situations, such as property management, financial transactions, and even legal actions. It is important to remember that a general power of attorney usually terminates if the principal passes away or becomes mentally unstable.
  2. Specific Power of Attorney:

    A specific power of attorney in contrast to a general power of attorney is created to permit a specific task or transaction. When granting a specific PoA, the agent is authorized to carry out certain account-related duties, such as buying or selling shares, managing investments, or modifying account information related to a Demat account. This type of POA is designed to limit the agent's authority to only the specified responsibilities listed in the document, providing clarity and accuracy.

Is it Mandatory to Execute a Power of Attorney in Demat Account?

To open a Demat Account, Power of Attorney is not required, although having one can be helpful.

In the stock market transactions, there are two main activities involved, i.e., buying and selling. 

When selling shares, power of attorney is required, but not when buying them. The online broker 

can transport your shares from the Demat account to the stock exchange when you sell them. So mainly a PoA is required as a result of this movement out of your account.

If you want to sell your shares without a PoA, you have limited options. One way is by using a Transaction Personal Identification Number (TPIN) provided by Central Depository Services Ltd. However, it is important to note that this method has certain limitations, such as the daily maximum transaction limit is Rs 1 crore. For off-market transactions, the daily cap is Rs 10 lakh overall and Rs 2 lakh per scrip. If your sales exceed these limits, you will need a power of attorney. 

As an alternative, one can use a Delivery Instruction Slip (DIS) to sell shares without the power of attorney. However, this involves sending the DIS to your broker, which can be time-consuming.

Precautions one should take before signing a PoA

Before signing a PoA in a demat account, it's important to take certain precautions to protect interests and assets. Here are some essential considerations:

  1. Go through the PoA document and ensure you understand its terms, conditions, and implications. Make sure to read the limitations and any fees related to the power of attorney (PoA) that the agent has issued.
  2. Consider consulting with a qualified legal advisor or attorney experienced in financial matters if you are doubtful regarding anything. 
  3. Before providing the PoA, one should thoroughly investigate the broker or Depository Participant (DP) and check their references, track record, and adherence to laws. 
  4. Define the responsibilities and accountability of both parties in the PoA document, outline the agent's duties, reporting requirements, and mechanisms for oversight and monitoring of account activities. 
  5. If possible, consider limiting the authority granted in the POA to specific tasks or transactions relevant to your Demat account.

Features and Benefits of the Demat Account with BlinkX

Investing in the stock market through the BlinkX Demat Account is a secure and reliable option in today's dynamic financial landscape because it provides: 

  • Seamless trading experience
  • Robust security measures
  • User-friendly interface
  • Dedicated customer support
  • Advanced trading tools and analytics

BlinkX Demat Account provides the added convenience of accessing digital loans against your securities, offering liquidity and flexibility in managing your financial portfolio. With a BlinkX Demat Account, investors can enjoy a seamless and hassle-free investment experience. The platform facilitates quick and secure transactions, empowering investors to capitalize on market opportunities efficiently. 

To manage Demat accounts effectively and ensure smooth trading activities, it is important to understand the significance of Power of Attorney (PoA). Investors who grant power to brokers or Depository Participants (DPs) must carefully consider the implications. Using a stock market app can be highly advantageous for investors in such a scenario, as it provides a stable platform that enables them to navigate the complexities of the stock market with confidence.

FAQs for PoA in Demat Account

PoA stands for Power of Attorney, a legal document that grants authority to another person to act on behalf of the account holder in managing their Demat account.

PoA is often required by brokers to facilitate seamless trading operations and manage account activities on behalf of the investor.

It is not mandatory, but some brokers may require PoA for efficient account management and trading activities.

It depends on individual preferences and risk tolerance. Investors should carefully consider the implications before granting PoA and ensure trust in the broker's integrity.

Yes, it's possible to open a Demat or trading account without PoA, but certain brokers may have different requirements or limitations.

One can sell shares without PoA through a Transaction Personal Identification Number (TPIN)  and Delivery Instruction Slip (DIS).