While Demat accounts are generally used to invest or trade, in particular more easily than ever before, they also come with a fair share of charges. For the convenience of electronic transactions, these charges are a small price to pay. Nevertheless, it still makes financial sense to keep in mind some aspects of these Demat account charges. In India, there are different best Demat account providers that you can explore and choose for your online trading.
Let’s have the breakdown of Demat account charges when you open Demat account online.
What is a Demat Account?
Starting with what is a demat account, you can say that the option to hold shares and securities electronically is provided in the form of a demat or dematerialised account. In order to make it easier for users to do business, shares are bought and held in a Demat account when trading on the Internet. A Demat account is a single place where all investments made by an individual in traded shares, government securities, exchange-traded funds, bonds and mutual funds are stored.
Demat has facilitated the digitisation of the Indian stock market and improved the governance of the Securities Exchange Board of India. Moreover, by storing securities in electronic form, the Demat account reduced the risk of storage, theft, damage and negligence. It first became available in 1996 on the National Stock Exchange. Initially, the opening of an account was a manual procedure, and it would take several days for investors to be able to open one. Today, you can open a Demat account on the internet in five minutes.
A Demat account provides a digitally secure and convenient means of holding shares and securities. It prevents physical certificates from being stolen, counterfeited, lost or damaged. You will be able to move securities immediately with a Demat account. The shares will be entered into your account in digital form once the transaction has been approved. Furthermore, you will receive the shares on an automatic basis when events such as stock bonuses, mergers and other transactions occur.
Charges Included for Opening a Demat Account
The charges included to open a Demat account are as follows.
- Opening charges for the Demat account:
The depository participant, also known as a depositary party, is required to be present during the opening of Demat accounts. They are usually brokerage companies or banks offering the possibility of opening a Demat account with them. In most cases, the opening of a Demat account is likely to require a nominal charge from your Deposit Protection Plan. In other cases, the depositor may allow you to use your Demat account for free for one year and then charge you again next year.
- The maintenance charges of the Demat account:
You may also be required to pay an annual maintenance charge for your Demat account in addition to the fees associated with opening a Demat account. Depending on the DP and the amount of your transactions, these small fees, which are levied annually, might range from Rs. 300 to Rs. 800.
- Demat Account Safety Charges/ Custodian Fees
Traders were required to keep physical, paper-based certificates for their shares and other securities prior to the introduction of electronic trading. The trader has been entrusted with responsibility for the security of these certificates. The safety of trader securities lies with the depositary partnership, given that Demat accounts have been introduced. The minimum custodial fee shall, therefore, be charged to traders, depending on how many securities are held in the Demat account.
- Transaction fees for the Demat Account:
The charges for the debit and crediting of securities on a Demat account shall also be among the fees charged by Demat. These fees are referred to as the transaction fee, which differs between DPs and DPOs in terms of brokering plan choice. The transaction fees charged by some payment processors depend on the number of transactions, and others charge a single transaction fee for an entire month.
Conclusion
Today, with the advent of technology, trade is far more easy and convenient for all parties concerned. The trading patterns of traders, especially when buying, selling or holding securities, have been fundamentally altered by the functioning of Demat accounts and opened them up to a wider degree of competition. The Demat Accounts service providers charge different fees linked to various aspects of managing the account safely and smoothly in exchange for these services. As a potential trader, it is important to keep an eye on these Demat charges and see what can be done to minimise them. To open a hassle-free Demat account, go ahead with a online trading app like BlinkX.
