A trading account, demat account and bank account is a necessity to invest in the stock markets. Having a demat account is mandatory. An investor needs to have one, but what if someone wants to own multiple demat accounts? Is it legal to own more than one demat account in India?
Can I have two demat accounts?
Look at investing like a game of cricket. A batsmen generally uses one bat, but is it compulsory to use or own just one bat? No! In the modern era, most batsmen use different bats for different formats of the game. Many batsmen change the bat in the middle of the innings to suit their game. Similarly, you can own multiple demat accounts and use them to invest in the stock markets as per your strategy. Market regulator Securities and Exchange Board of India has not placed any kind of limitations on the number of demat accounts a person can own.
It is completely legal to own more than one demat account in India. However, opening multiple demat accounts with the same stockbroker is not allowed. All the dreamt accounts should be opened through different brokers. Even with multiple demat accounts, all the transactions can be easily tracked by the market regulator. The PAN card is linked to all demat accounts and if required, regulatory agencies use the PAN to track transactions rather than individual trading and demat accounts.
With the regulations around multiple demat account ownership clear, it is pertinent to ask, why is more than demat account required?
Utility of multiple demat accounts
There are various types of participants in the stock markets. Some buy and sell in a single day, some hold for a few days, while some are long-term investors. Demat accounts hold all the securities owned by the investor. When a trade takes place, the securities are directly transferred from the seller’s account to the buyer’s. Multiple demat accounts are used by some investors to differentiate between their trading portfolio and investing portfolio. Having separate demat accounts reduces the probability of confusion while investing.
The Indian financial markets have witnessed the entry of manby new-age brokers in the last decade. Many investors prefer having trading and demat accounts with both discount and full-service brokers. Opting for multiple brokerages injects diversity in the services offered. The best of the stockbrokers offer most of the service, but there can always be a difference in the quality of research reports or the availability of analytics tools. Having multiple demat accounts with different brokers helps in bridging any shortcomings in the variety of available services.
Points to remember before opting for the second demat account
The answer to, ”can I have multiple demat accounts?” is a yes. However, one should take into account certain factors before opting for multiple accounts.
- The annual maintenance charge has to be paid for each demat account. Having more than one demat account will increase your expenses.
- Tracking the securities in multiple demat accounts can be difficult.
- In case the demat account is left dormant for a long term, the account may be frozen and you will have to provide KYC documents to revive the account.