Step-by-Step Guide to Closing a Demat Account
The Securities and Exchange Board of India (SEBI) introduced Demat accounts in 1996 to revolutionize India’s trading system. Since then, the presence of these accounts has made investments in stocks and mutual funds more convenient and easier. Today, it is mandatory for all traders to have a Demat account to invest in stocks.
Most traders hold more than one Demat account to trade conveniently. However, managing numerous accounts can be challenging and lead to unnecessary expenses. If you have too many Demat accounts, it is advisable to close them.
Keep reading for a step-by-step procedure to close a Demat account online.
What Are the Different Types of Demat Account Closures?
There are two types of Demat account closing procedures. Let’s look at both types of account closures for Demat accounts.
- Full Account Closure
You can follow the steps of full account closure when there is no pending balance in your Demat account. The procedure to fully close a dormant Demat account is pretty simple.
You have to submit the account closure form with the necessary documents to your Depository Participant (DP) online or in person. Before raising the request to close a Demat account fully, ensure there are no pending balances or outstanding payments to the DP.
- Transfer and Account Closure
There may be situations where you need to close a Demat account with pending payments and balances. In cases like this, you can transfer your securities to another Demat account and then raise a request for account closure. The steps for this type of account closure are more elaborate than the first one.
What Are the Steps to Close a Demat Account?
Here are the basic steps to follow to close a Demat account online.
Step 1: Download the account closure form that you can find on the Depository Participant’s website or app.
Step 2: Fill out this closure form and upload it to your Depository Participant’s platform with the necessary documents. If you have a joint Demat account, the signatures of both partners are necessary for providing consent to close the Demat account.
Step 3: If your account has a pending balance, you must fill out a Delivery Instruction Slip (DIS). This will allow you to transfer the remaining securities to another Demat account.
Step 4: You should also submit the Client Master List (CML) of the target Depository Participant with signature, stamp, and logo.
Step 5: After completing the documentation process, ensure that your Demat account has no negative balance.
Step 6: Finally, the account closure process will begin after the successful submission of the DIS, CML, and Demat account closure form along with the necessary KYC documents.
What Details Are Necessary to Close a Demat Account?
To successfully close a Demat account, you need to produce the following details/documents:
- A valid reason to close the Demat Account
- Documents to support KYC details like name and address. These include Aadhaar Card, PAN card, and Voter ID.
- Depository participant ID and Client ID
- Signature of partner owning the Demat account (if any)
Things to Consider Before Closing a Demat Account
Here are some points you must consider before closing a Demat Account:
- Your Demat account balance should be zero. If the balance is negative, you need to settle it with your Depository Participant before closing it.
- If there are some pending balances in your Demat account, you need to transfer the same to another demat account or bank account, as the case may be, prior to applying for account closure.
- If any unused DIS is left with you, consider returning the same to your DP while submitting the closure form.
- International Securities Identification Numbers (ISIN) are unique IDs for company shares. When a company no longer trades its shares, its ISIN is considered dead. If your account possesses such dead ISIN, consider applying for dematerialization to your DP.
Your DP will forward this information to their respective Depository, who will further inform the registrar. It is the registrar who will take the necessary actions to dematerialize such shares.
Closing an unused Demat account is a necessary step towards effective financial planning. This is solely because, even if you do not use a particular Demat account, you will need to continue paying associated charges like the annual maintenance charges, custodian charges, etc. The above steps will help you close your dormant Demat account and save money.
Frequently Asked Questions
Why do I need to close an unused Demat Account?
Demat accounts that do not witness much activity are a liability. This is solely because you must pay maintenance charges to your stockbrokers for holding that account. These accounts are also a haven for illegal activities by scammers.
What is front running?
Scammers can gain illegal access to your dormant Demat account and engage in trading stocks through insider trading. This is called front running. To avoid such instances, you need to close any unused Demat accounts under your possession.
How long does it take to close a Demat account?
You first need to submit the closure form and required documents. Then, it takes 7–10 working days to close the account.