A Demat account, or a “dematerialized account” has come to be associated with convenience. It allows users to seamlessly trade securities in the secondary markets. A Demat account is much more than an account, it provides you the ability to hold shares, bonds, ETFs, mutual funds, and other investments in an electronic format without the need to hold any physical certificates or documents. However, this convenience comes at a cost, when everything is electronic, it is easier for hackers and creative brokers to squander your hard-earned wealth.
Is Demat account safe?
Normally, it is safe to open demat account online. However, you should do it only on the official website of a broker that you trust. These brokers or depository participants are registered with the Securities and Exchange Board of India, which keeps a close eye on them. One of the main benefits of having an electronic system for trading securities is that everything is online. You may wonder is it safe to open a Demat account online? In most cases, yes, it is. Just remember to go for known brokers who have been in the market for a while and have a good reputation.
The potential for fraud has been substantially reduced these days, particularly as SEBI has enhanced its oversight of depository participants. It is completely safe to open a Demat account with any of the depository participants such as banks and trading houses. While there is always a minor risk of your broker conducting unauthorized transactions from your account. You can avoid fraud and unauthorized transactions from your account by taking some simple steps, such as;
- Keep your mobile number and e-mail id updated with the depository, be it NSDL or CDSL
- Regularly check e-mail statements and SMS alerts sent to you by the depository
- Regularly check holding statements sent to you by your broker
- Do not share your login details and password with anyone, and keep changing passwords regularly
- If any abnormality is seen, immediately contact your depository provider, NSDL or CDSL. They have specialized teams to look into fraudulent transactions
- Avoid keeping excessive funds in your broking account. Transfer funds only when you need to buy stocks. If there are excess funds, transfer them back to your bank accounts.
- Keep your Debit Instruction Slips in a safe location. Do not provide pre-signed slips to your broker for offline transactions
- Freeze your account if you are not planning to use it for a while; this facility bars any debit transaction on your account while still allowing receipt of dividends, bonuses, and splits of shares.
A Demat account brings great ease and convenience while trading in Indian secondary markets. A completely electronic system may leave you wondering if your Demat account is safe? As with all electronic accounts, it is not possible to have a 100 percent guarantee of safety. However, with the aforementioned steps, you can minimize the potential risk of fraud on your Demat account.