Why You Shouldn’t Let your Demat Account Go Dormant | Motilal Oswal
Why You Shouldn’t Let your Demat Account Go Dormant | Motilal Oswal

Why you Shouldn’t Let your Demat Account Go Dormant

Opened a demat account and now it is lying dormant and unused, ungraced by even one small transaction? Well, there is a possibility that your brokerage can declare it to be a dormant demat account. 

The market regulator SEBI permits brokers to decide the timeline in which it can declare demat account as dormant. Brokers mark an account as an inactive demat account when no transactions has taken place in the account for a long time.

 

  • What you need to do if your Demat account goes dormant?

Depending on the rules followed by your broker, a demat account can be declared a dormant account if it hasn’t had any transaction from 11 months to five years. Receipts of dividends or corporate actions are not counted as transactions by brokers.

Any transaction occurring in a dormant demat account that holds shares and securities is marked as sensitive by brokers for the reason that it is likely to misused by scamsters. In case of the sale of shares from such accounts, the internal systems of brokers will kick into action and demand that these transactions be authorised by the account holder. Alternatively, the brokers can also request reactivation of the account before shares are sold from the account.

To reactivate a dormant demat account, the account holder will need to fill in a few forms and complete KYC requirements. Some brokerages may also demand a small reactivation fee but this is fairly uncommon given that a reactivated account will generate commission from buy and sell transactions.

  • Misuse by scamsters

In certain cases, the scamster who has identified an account as a dormant account might update false material information such as mobile number, email address, bank account details of the account. Consequently, all the transactions taking place illegally in the demat account will never come to the notice of the account holder.

The scamster might also open the ‘Account set’ after getting his hands on the KYC documents. To prevent an untoward event like this from happening, investors should specify the date and the reason for submission on any document before submitting it for KYC purposes. 

Investors must also be careful to revise all login IDs and passwords at regular intervals. Many investors store sensitive information on their phones. In case, they lose their cells phones, they must change all their login IDs and passwords before the phone or the data falls in the wrong hands. Investors are also better off avoiding personal information like date of birth or mother’s birth date on social media.

Final word
Investors must make it a point to enquire beforehand about the timeline in which their demat accounts can be declared dormant by their brokerages. They should also check if any reactivation fee would be levied. However, the best policy would be to keep investing and using the demat account regularly. 
Investors can open a demat account with Motilal Oswal and get access to a hassle-free, smooth and safe share trading experience.

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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