A Demat account holds certificates of shares owned by an individual in an electronic or dematerialised format. This makes it easier to buy and sell securities across asset classes, including mutual funds, ETFs and fixed income investment products. Demat accounts can be opened with a brokerage house or depository participant (DP) in order to store securities and carry out trades.
Brokerage houses and depository participants (DPs) levy Demat account maintenance charges(AMC) or folio maintenance fees for the services they provide. AMCs cost between Rs 300 and Rs 900 and can be paid as a one-time charge or quarterly. Often, for the first year, AMC Demat charges are waived off so that DPs can attract new customers. Often, when a customer opens a Demat account with a bank, it comes bundled with a trading account as well as a bank account. The AMC in such a situation is relatively lower. Conversely, if a Demat account opened with one bank is linked to a savings account in another, the AMC levied would be higher.
1. Opening charges
DPs charge an opening fee each time someone opens a Demat account. Although negligible, opening charges are often subject to special offers to allow for an easy start for new investors. Some DPs may even open Demat account free of cost. Moreover, brokers may also offer incentives to open two-in-one or three-in-one accounts that integrate Demat accounts with trading and bank accounts. Before Demat accounts were the norm, banks would charge Rs 700 to Rs 900 as an opening fee.
2. Custodian or safety fee
This fee enables a DP to keep an investor's securities safe in its custody and manage them effectively. These can be charged on a monthly basis, or based on the number of securities held in your account. In fact, such Demat charges can be between Rs 0.5 and Rs 1 per International Securities Identification Number (ISIN). If a one-time payment has already been made, charges for individual ISINs will not be levied.
3. Transaction fee
Transaction fees are charged each time securities held in a Demat account are bought or sold. Often, a DP will charge transaction fees on a monthly basis. These fees, however, can differ based on the type of transaction that may have taken place. Depending on their policy, brokers may either charge a transaction fee only when a security is debited, or for both debited and credited shares.
Demat accounts have made it incredibly easy and convenient to store and trade shares and other securities. However, brokerages require some funds for Demat account maintenance charges, safekeeping your securities, and for any transactions you may authorise. DPs offer a number of ways in which to make these payments. Many brokers may even grant offers or waive some of these Demat charges off.
Related Articles: How to Open a Demat Account Without a Broker | Factors to Keep in Mind While Opening a Demat account | Factors to Consider When Opening a Demat Account | 10 Points to Remember When Operating your Demat Account | Types Of Demat Account & Trading Account
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