Here’s Everything You Need To Know Before Opening Multiple Demat Accounts In India

There are many investors who look forward to the prospect of having multiple Demat Accounts.

While it is true that any investor can open multiple Demat Accounts there are certain things or rather technicalities that come into consideration when it comes to open multiple Demat Accounts. It would be a good idea, therefore, if an investor gets clarified about the Demat Account meaning and how having multiple Demat Accounts will be different. 

What Is A Demat Account?

The first and foremost thing to understand about multiple Demat Accounts is to understand what a Demat Account is. A Demat Account, in simple terms, means an account where an investor can hold all his equities, bonds, mutual funds, etc in a dematerialized or electronic form. It is like a savings account where instead of money an investor can keep multiple forms of investments. 

The process which converts physical share certificates into electronic form is called dematerialization. A Demat Account can be opened with the assistance of a depository participant or DP who acts as a sort of broker or agent facilitating transactions between the investor and the depository.

A depository is a financial institution under which an investor’s Demat Account can be opened. Many banks and financial institutions such as IIFL act as depositories. 

Demat Accounts imply that an investor has more than one Demat Account in his name. 

Conditions For Multiple Demat Accounts 

Opening multiple Demat Accounts is not as simple as opening a single Demat Account. The conditions which come into force while opening multiple Demat Accounts are as follows: 

• Multiple Demat Accounts cannot be opened with the same DP or depository. Therefore, in order to access multiple Demat Accounts, an investor has to go for as many different DPs and depositories as he wants the number of Demat Accounts. 
• Annual Maintenance Charge (AMC) is the fee charged by the DP for the maintenance and service provided to an investor. AMC is charged on an annual basis and even during those years when no transactions take place. Therefore, having multiple Demat Accounts imply that the charges would be payable for multiple accounts. 
• Investors having multiple Demat Accounts will be required to use all of them. Not using a Demat Account for a certain period of time can freeze the account. To reactive the frozen account the investor will have to resubmit his documents for KYC. 
• Multiple Demat Accounts come with the condition that an investor has to constantly keep track of both the accounts. 

Advantages of Multiple Demat Accounts

A Demat Account would be meaningless to exist if it does not provide any advantages to its account holder. Likewise, multiple Demat Accounts also hold some merits to attract investors. Some of them are as follows: 

• As multiple Demat Accounts imply different DPs, it means that an investor will have more dynamics regarding the opportunities and offers that he can have from different depositories. 
• Multiple Demat Accounts can be used to classify and segregate the trading and investment portfolios of an investor. This will organize his data in a better way and he can keep track of them with more clarity. 
• Multiple Demat Accounts can be personalized in such a way that they serve different purposes for an investor. For instance, if an investor is looking forward to long-term investments he can use a different Demat Account than he usually does for short-term investment. 
• It might be a situation where a certain form of investment is more favorable through a particular DP while another one is not. In such scenarios, having multiple Demat Account can come handy. 

Demat Account Charges 

Whether an investor should go for multiple Demat Accounts depends a lot on the charges he will have to afford for maintaining them. If an investor gets multiple DPs offering him their services in lesser charges it would be more encouraging to him to have multiple Demat Accounts.

Monetary charges are a key factor for having multiple Demat Accounts.

Some of the common charges for a Demat Account are as follows:

Account Opening Charge: Some DPs levy a one-time account opening charge. Though it does not follow that the account opening charge is mandatory. There are depositories that do not charge an account opening fee.  

Annual Maintenance Charge: As already mentioned, AMC refers to the annual fee charged by the DP for the services it provides. 

Conversion Charge: Converting physical shares or mutual fund units into the electronic form is chargeable. Also, the reverse of this process i.e. converting electronic stocks back to their original physical form (a process known as rematerialization) is also chargeable. 

Postal Charges: There are certain important documents that a DP has to send here and there on behalf of the investor. The fee levied on such transit expenses is called postal charge. 

Once an investor gets complete information about the Demat Account and multiple Demat Accounts, it will be easy for him to choose the correct decisions. If he is compatible with all the requirements and conditions for having multiple Demat Accounts it will be rewarding for him to have multiple accounts.