Will My Demat Account Automatically Close?

The Demat account-based online trading system has made it easy for retail investors to make money on the side. In simple terms, a demat account is nothing but an electronic depository to store shares and other financial securities. Anyone can trade in the stock market using this mandatory online account. 

Individuals can open demat account online without any restriction of numbers to segregate their investments based on financial goals and holding period. After accomplishing the goal, they may want to close extra demat accounts to avoid unnecessary demat charges like annual fees and maintenance charges to be paid on unused demat accounts.

Will A Demat Account Automatically Close?

Automatic account closure depends on the status of your demat account. 

If you have not made any transaction in your demat account for a long period, the broker can turn it into inactive and then dormant. You will not be able to invest using this account unless you reactivate it.

The time period is set with each broker for how long a demat account will be allowed to remain inactive before being declared dormant. This term may differ with brokers as per the agreement between the stockbroker and the account holder. 

Before declaring a demat account as a dormant account, brokers need to follow a process to intimate the client. Still, if the account holder doesn’t make any transaction in their demat account within the stipulated time, it will be declared as dormant. 

Usually, brokers do not declare your inactive account as dormant if you have paid the demat account annual maintenance charge on time.

Demat Account Closure Procedures

There are two types of Demat account closures:

Direct Account Closure: If you do not have pending payments or any holdings in your demat account, you can raise a request with your stockbroker to close the demat account.

Transfer and Account Closure: If your demat account holds securities, you need to first transfer these securities to another demat account. It will make the account closing procedure slightly different.

The demat account holder may need to visit the office or branch to submit the required account closing form and documents. Apart from the balance of your demat charges, there will be no extra charges for demat account closing.

Let us elaborate steps for both scenarios.

Direct Demat Account Closing Procedure

• First, download the demat account closure form available at the broker’s official website.

• Fill out the form and submit it with valid KYC documents. You may need to visit the broker physically to submit the form and documents, or you can mail them to the head office.

• If a demat account is used by more than one person, for example, a demat account of a minor, then both account holders need to sign the form in the presence of the stockbroker.

Make sure there are no securities in your demat account. Also, it does not have a negative balance due to demat charges outstanding. In case there are securities, the process will vary. 

Transfer and Account Closure 

You need a Debit Instruction Slip (DIS) to close a demat account holding your securities. You need to transfer the securities to another demat account to close that account. You need to check with which depository your stockbroker is registered – the NSDL or the CDSL.

• Pick a DIS book from your stock broker. 

• Fill in the share ID – International Securities Identification Number (ISIN) number of the shares that you need to transfer from an existing demat account to another and Target Client ID. ISIN is a 12-digit code. Target Client ID is a 16-digit code.

• Tick Intra-Depository or Off-market transfer if both the stock brokers – the one with existing securities and the other one with which you want to transfer the securities – are authorised by the same depository. Otherwise, tick the Inter-Depository transfer if both stockbrokers are authorised by different depositories.

• After this, submit this DIS to your existing broker. The broker will verify the self-attested Demat closure form, and the transfer will be completed within a few days. Then it will close your demat account. It will send a demat account closure confirmation mail to your registered mail ID.

If you want to take a break from stock trading, you can utilise the Demat Account Freeze Facility. No transaction can be made using your demat account, and you will continue to receive corporate benefits in your demat account.