Why You Need to Have a Demat Account and RTA Service Provider | Motilal Oswal

Check why you need to have a Demat Account and RTA service provider

A demat account is an entry ticket to the trading world where you can buy and sell shares whenever you want. In India, the name “demat account” was first heard in 1996, and since then, things have drastically changed for both traders and stockbrokers. The demat account origination has put all the tedious paperwork at bay and opened the doors for traders to easily trade. 

Unlike offline, the process to open demat account online is pretty simple and less time-consuming. Other than that, it also lowers the overall cost of trading. Now, if you want to open a demat account with Motilal Oswal, all you have to do is apply online, fill in the necessary details as asked, attach the mandatory proofs to the application, and submit it for final processing. Once your account is verified with/by the stockbroker, you are free to use it to kickstart your trading journey. 

Well, some traders enthusiastically open demat account online but don’t use them regularly, or may have left using them after a period. Then, this leads to account freezing. Meaning, the stockbroker freezes your online demat account for being inactive for a long time. To revive your account, you have to endure the same eKYC steps again. 

  • Account Freezing

A demat account holds your shares in electronic format. Whether you are dealing with the shares physically or online, it’s pivotal to create a shield to protect your demat account from frauds and risks. As you are already aware of the account opening steps and further details of operating, let’s discuss the flip side of the demat account, i.e. account freezing. Say, you have a demat account online. You used it for one month, and then, left overseas for a couple of years. On your return, you found out that you were unable to make any transactions or trades anymore. 

Now, if you are wondering what could possibly be the reason behind this, it’s simple - your DP or stockbroker went for account freezing. If the demat account is not used for a prolonged period, the stockbroker freezes your account. You cannot process any trades until you revivify your account. 

There are two types of account freezing - permanent closure of your demat account, and voluntary closure. In the latter, you have to go through the whole e-KYC process by connecting with your DP or stockbroker again. Whereas in the former, you have to fill in the account closure application form given by your DP, and duly sign it to reaffirm your ratification to cease your demat account.   

  • Delivery Instruction Slip (DIS) or Receipt Instruction Slip (RIS)

Whether you are a regular trader or a trading enthusiast or a finance expert or an investor, you must have come across the term “Delivery Instruction Slip or DIS Slip”. This is like a token for traders who trade shares offline. You require this document to transfer shares from your demat account to another trader’s demat account. Without this slip, you can’t facilitate the transfer or sale of shares. DIS Slip wouldn’t be an obstruction for traders who use online demat accounts. Even the traders don’t need to go the extra mile to submit the Delivery Instruction Slip or DIS Slip. 

When it comes to offline, traders have to submit the DIS Slip to the respective broker or depository participant to process the sale of shares. The DIS Slip contains all the important details of the trade. When it comes to online trading, traders can hand over the power of attorney to the depository participant or DP or stockbroker to handle their trades on their behalf. However, sometimes, the Delivery Instruction Slip gets repudiated. It can be due to myriad reasons, and here are a few listed below.

  1. If the 12-digit alphanumeric code (ISIN) number is not right.
  2. If the number of shares in words is wrongly written. 
  3. Failed to match the signature.
  4. Lack of shares in the trader’s demat account.
  5. Overwriting in the Delivery Instruction Slip.
  6. Marked market transactions as off-market transactions.

Now, one thing you must note here is that all the trades are settled on a T+2 basis. Meaning, when the trader sells the shares, the transaction settlement period follows after 2 days, excluding the deal day. Hence, to avoid future complications, it’s better to submit the DIS slip on the same day of the trade, or no later than 11 a.m. on T+1. The earlier the submission of DIS slip, the smoother the transfer of shares from one demat account to another. 

In case of errors concerning the DIS slip, you can swiftly resolve them by connecting with your DP. You can claim this advantage only if you hand your DIS slip on the trading day itself. On the contrary, if the slip issue hasn’t been resolved, your shares will be auctioned. The plunge in the share price would lead the trader to pay additional auction value, which is a loss to the trader. 

The spike in the share price wouldn’t do any better for the trader because any extra returns or accrued amounts will be redirected to the Investor Protection Fund. One way to avert such scenarios is by double-checking the DIS slip hitherto submitting it to the depository participant. 

  • Physical Share Certificate

Till today, some traders are old school and prefer holding shares in physical form before converting them into electronic form. So, whenever shares are issued or transferred, companies send a physical share certificate to the trader as proof to encash dividends. In case, if your physical share certificate lost its original shine, you can always get it exchanged by returning the damaged certificate. 

  • RTA Service Provider

In today’s trading era, the need for a demat account has become mandatory for traders, especially to close trades smoothly and efficiently without facing any discrepancy in the process. Plus, a demat account acts as an ad hoc to store shares in an electronic form whenever necessary. As they say, everything comes with responsibilities and obligations, so is for demat account owners. There are a number of duties that every trader must and should duly oblige for better functioning of the demat account like demateralization of shares, reconciling contract notes, revalidation of dividends, etc. 

Going solo to do these aspects would eat up a lot of time, and also hamper the regular schedule. That’s where RTA service providers (Registrar and Transfer Agents), come into the picture. All the RTA service providers are officially approved by the Securities Exchange Board of India (SEBI)  These agents act as a bridge between issuers and two depositories National Securities Depositories Ltd and Central Securities Depositories Ltd to facilitate a proper trade by offering an array of services like dematerialization, rematerialization, initial public offers, and corporate actions.

Bottom Line:

Traders willing to start trading can open demat account online from a registered DP. For instance,  Motilal Oswal is a legit depository participant cum stockbroking firm that offers a great deal of trading and demat account services to traders. The firm is also a registered member of two authority bodies - CDSL and NSDL. If you hold the shares in the physical form, you can transfer them to your account by using the DIS slip. You can collect the physical share certificate from the company after the issue or transfer is made to your demat account. But handling all the demat account services in one go is definitely a tedious task at hand. RTA service provider resolves all these problems by taking care of them on your behalf. 

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 | Upcoming IPO | LIC IPO

 

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