Basic Service Demat Account (BSDA) : Details and FAQs

Indian middle class has more faith in real estate than the equity investment. But still quite a number of people are getting exposed to stock market and started investing in shares by opening their first demat account. Major portion of them invest very small amount of money normally below 2 lakhs. However the Stock brokers (Depository participants) usually charge various charges which make a huge dent in returns of these types of small investors. To address this, Security Exchange Board of India (SEBI) has introduced a special type of demat account Basic Services Demat Account or BSDA demat account.

Related Articles:

  What is a Basic Services Demat Account (BSDA) ?

Basic Service Demat Account is a demat account offered by the stock brokers which provide limited services at reduced costs to retail investors. It is introduced by SEBI to encourage the retail participation in equity market by reducing the cost of maintaining the securities in dematerialized form. BSDA account is also known as “no frills” account.

  Eligibility criteria for BSDA Account

  • Only the retail investors of India can avail this facility.
  • It can be opened by an individual who does not have any Demat account
  • If he already has a demat account as sole account holder or as primary owner in a joint account , it can be converted to a BSDA account provided he has only one demat account across all DPs (Stock Brokers)
  • Also he has to ensure that the value of the securities held should not be more than Rs 2 Lakhs at any point of time

It is better to understand the details of BSDA account in the forms of frequently asked questions (FAQs)

  What is the cost advantage of BSDA Demat Accounts?

The Brokers levy different types of charges for a non-BSDA accounts. For example, the Annual Maintenance Charges (AMC)  by some of the brokers are in the range of Rs 300 – Rs 900. So if an individual has not invested any amount, he still has to pay these large fees to DPs. Some of the banks open 3-in-1 demat account to the people who just intends to have only savings bank account. Their sales reps lure the customer by telling it as free demat account, but in most of the cases it is free for first year only and start charging AMC fee next year onwards. In this case, it is better to close the demat account or convert it to BSDA account if he has any plans to invest only small amount.

Now the most important part, cost structure of BSDA demat account

  • No AMC charges if the total value of the investment is less than Rs 50,000
  • Rs 100 if the value is above Rs 50,000 and below Rs 2,00,000
  • Above two lakhs, regular charges as per the non-BSDA accounts will be applicable which is determined by the stock broker.

Also Read : Stock Brokers of India charging Zero AMC charges

  Who will determine the values of the investment in BSDA?

This is an interesting question, the SEBI has allowed Stock Brokers to determine the value of the investment. They have to monitor the value based on the closing price of the securities or NAV in case mutual funds.


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  What are the other limitation in the services of BSDA demat account ?

  • SMS alerts will be sent only for debit transactions
  • If you opt for the physical statements, only first two will be free and Rs 25 is levied thereafter (however statements in electronic form is free)
  • Transaction statement will be sent only at the end of the quarter, no statement will be sent if there is no transaction during the quarter.
  • Annual statement of holding will be sent to the physical address or electronically as opted by the customer

  How to convert the existing Demat account to BSDA account?

If you hold an active demat account with a DP, you can ask the DP to convert your demat account into BSDA on the date of the next billing cycle based on value of holding of securities in the account as on the last day of previous billing cycle.

Each broker will have standard application format that to be dully filled and submitted by the client (Beneficiary owner) to the broker. You can refer this link for format of this form. Example of the form by ICICIDirect can be seen here.

  Final Thoughts

Usually common public flock the stock market during the bull market such as in year 2007  there will be increase in number of demat account opened. However the many of them are not aware of the existence of Basic Service Demat Account (Brokers never tell them) and keep paying the hefty fees. Onus is on the regulators to give more publicity to the BSDA accounts so that small investors are benefited.

Best Banks in India to Open 3-in-1 Demat Account

It is year 2006 banks started integrating the demat and trading account with the Savings account to provide the 3-in-1 demat accounts to the investors.  It was a huge hit with people who were conservative who prefer to have single platform for both investment and banking needs. But since then, they lost their sheen and investors nowadays like to open their account only with top Indian banks which provide best 3-in-1 demat account. No point in opening the demat account if the bank does not have good numbers of ATMs hence you don’t use it’s savings account for day to day transactions.

Brokerage is not main business of Banks as opposed to that of stock brokers. Broking is bread and butter of stock brokers and hence they tend to provide superior support in comparison to Banks. But 3-in-1 demat accounts have their own pros and cons and let is understand them in this article

  What is a 3-in-1 Demat Account?

3-in-1 demat account is an account offered by banks wherein three different types of accounts, namely, Savings account, trading account and demat accounts are linked to a one single account.

Usually Demat and trading account is opened with a Depository Participants (Known as “Stock broker” in layman parlance and attached to NSDL or CDSL) and Savings Bank account with a bank and link to the trading account. But in case of 3-in-1 demat account, trading and demat accounts are also provided by the bank itself along with the savings account. In this case, banks also acts as DPs.

  Advantages and disadvantages 3-in-1 Demat account

3-in-1 Demat accounts usually have below advantages:

  • Transfer of funds is quick: While in case of withdrawal of funds from a full service broker, one need to login to their back office and place a withdrawal request. The funds will get credited to your linked banked account by end of the day. However in case of 3-in-1 account, funds will reflect instantaneously.
  • Reduced paper work: Bank will take care of the entire cycle of all the three types of account in compliance with SEBI and Stock Exchanges like NSE and BSE.
  • Multiple Investment Avenues : They provide single window for various invest avenues such as equities, derivatives, mutual funds, IPOS, commodities, currency, bonds , company fixed deposits, NPS, insurance and other financial services.

  Disadvantages of 3-in-1 Demat accounts :

  • Minimum Average Balance : If you already have a savings bank account but opening another one as part of 3-in-1 demat account, it will be a burden to maintain the minimum average balance which is Rs10,000 for urban and Rs5000 for rural accounts.
  • Higher Brokerage: Brokerage charged by the Banks are higher compared to the full service broker.  Usually the full service brokers such as Angel broking and Sharekhan charges 0.3% for delivery whereas Banks offering demat account charge around 0.5%.
  • Annual Maintenance Charges : Some brokers are offering Zero Annual Maintenance Charges (AMC) which is a annual fees customer has to pay the broker for maintaining his account. In case of banks, the AMC charges are are also usually high.

NOTE:

If you are really concerned about the brokerage, you should have a look at another types of brokers called Discount Brokers. If you dont know about discount brokers , we strongly suggest you to read this article about various types of Stock brokers of India.

Discount brokers such as Zerodha charge Rs 0 (Zero) for delivery and Rs 20 for intraday traders. For example, if one intends to invest Rs 10,00,000 then with 3-in-1 demat account, the brokerage fees will be around Rs5000 whereas with discount broker it will remain zero irrespective of quantum of investment.

Related Articles :


 

  Best 3-in-1 demat accounts of India

Almost all the new age banks provide the demat account. Some of them open the demat account by default even for the people who go to them to open savings bank account!. But if one is genuinely interested in opening the demat account, then he/she should stick with big names only.

Here is the list of Best banks offering 3-in-1 demat accounts:

  1) ICICDirect from ICICI Bank:

icicidirect logoICICIDirect is the brokerage arm of ICICI bank. ICICIDirect is the biggest stock broker of India as on date serving more than 15 Lakh+ customers. One can find the ICICIDirct office in most of the major cities and towns of India. It is pioneer in opening up the online demat account culture in India.

ICICDirect brokerage charges : 

Equity Delivery: 0.55%

Equity Intraday: 0.275%

Equity Futures:  0.05%

Equity Options: Rs 95/lot

For detailed information about the various brokerage slabs of ICICIDirect, visit ICICIDirect review page.

  2) Kotak Securities from Kotak Bank

Kotak_Securities-reviewKotak Securities from Kotak Mahindra Bank offers 3-in-1 account in the name of Trinity account. Though this account apart from investment, one can login to their Securities Academy which teaches about investments and stock markets. They also send periodic SMS alerts and research reports on the economy, investment plans and companies that have a good prospects in the market.

Kotak Securities brokerage charges : 

Equity Delivery: 0.50%

Equity Intraday: 0.05%

Equity Futures:  0.05%

Equity Options: Rs 100/lot

Read: Complete review of Kotak Securities and its brokerage structure

  3) HDFC Sec from HDFC Bank

HDFC_Security-logoHDFC Securities is around us for more than a decade and service diverse customer base including retail and Institutional Investors. HDFC  Securities also provide seamless transfer of funds between trading and savings account.

HDFC Securities brokerage charges :

Equity Delivery: 0.50%

Equity Intraday: 0.05%

Equity Futures:  0.05%

Equity Options: Rs 100/lot

Read the complete review of the HDFC Securities here

  4) SBI Cap Securities :

Sbicap-securities-logoSBICAP Securities Ltd (SSL) is the broking arm of the State Bank Group and a wholly owned subsidiary of SBI Capital Markets Ltd. SSL commenced operations in the first quarter of financial year of 2006-2007 with a view to providing primary and secondary capital market access to investors. But as you know the SBI bank is with us for decades and some of the senior citizens still swear by nationalized banks so they normally prefer to open the demat account with these banks.

SBICap Securities brokerage charges :

Equity Delivery: 0.50%

Equity Intraday: 0.05%

Equity Futures:  0.05%

Equity Options: Rs 30/lot

Read : Complete details about the SBICap securities brokerage charges

  5) AxisDirect from AXIS Bank :

Axis-Direct-brokerage-logoAxis Direct (Axis Securities)  is subsidiary of Axis Bank Limited (Erstwhile UTI Bank). Axis Direct was incorporated in year 2005 and been involved in the offering and distribution of various financial  products to retail customers in India. AxisDirect has over 1.5Lakh Active customers and is one of the Top 10 Brokerage firm of the country.

AxisDirect  brokerage charges :

Equity Delivery: 0.50%

Equity Intraday: 0.05%

Equity Futures:  0.05%

Equity Options: Rs 100/lot

Read : Complete review of the AxisDirect and its details of the Brokerage Charges

  Final Thoughts!

In our opinion, for a long term investor, the brokerage charges hardly matters. When the returns he is looking are in the range of couple of times the investment, few cents of difference in the brokerage charges wouldn’t make large difference when compared to the peace of mind he gets in a good 3-in-1 demat accounts. However it is essential to carry out a detailed comparison of above 3-in-1 demat accounts in all aspects before opening the account. And for a trader, these accounts are a big NO and should prefer the trading and demat accounts with lowest brokerage charges.

Do you already have a 3-in-1 demat account with any one of the above banks?, if yes, please share your experience with the fellow traders through comments.

Top Brokers Offering Free Online Demat Account in India

Last updated on January 13th, 2017

If you just landed on this page searching for information about free online demat account, let us warn you there is no such thing in this world as free (as you may already know). Even though some stock Brokers advertise about Zero Annual Maintenance Charges (AMC) demat account, the offer is usually for first year only and you will be charged second year onwards. And few other share brokers lure customer with zero demat account opening charges, but they make up for it through AMC charges or higher brokerage charges.

Also be informed that demat is not mandatory if one intends to trade in derivative (Futures and Options) only. In this case it is enough to open a trading account for which there will not be any AMC charges levied. But some sales representatives of even reputed brokers misguide the new investors to open demat account since their incentives are linked to it.

Off course you save few bucks for opting for free demat and trading account, keep in mind that the amount is peanut in comparison to the brokerage charges. Account opening charges are one time and AMC fee is paid once per year, but brokerage (commission) is paid for every transaction and hence you should pay attention to minimize it. If you are a regular (or intends to be) , it is best to consider discount brokers whose brokerage charges are at rock bottom compared to Full service brokers. If you are new and does not know about the difference types of stock brokers in India, please read the article how to select the best share broker for yourself.

Just to give you an quick example, if you want to invest Rs1,00,000 through a broker who charge 0.5% brokerage, you will end up in paying Rs 500 as commission. On the other hand discount broker such as  charges Rs0 irrespective of he invested amount.  Hence even though you save Rs 300 (Account opening charges of Zerodha) by opting for first broker who offer you zero demat account opening fees, you will loose much more in brokerage front. Now your fee goes up to Rs 5000 if you invest Rs 10,00,000 with first broker but remains Rs0 with Zerodha

Read : Complete details about on Zerodha Brokerage charges

But it is worthwhile to look at the below list of the brokers offering free online demat accounts with or without Zero Annual Maintenance Charges.

  Angel Broking

angel-broking-open-free-online-demat-account

Angel Broking is one of the premier stock broking firms of India and they are offering lifetime free demat account as part of their limited period promotional offer. It has more than two decades of existence to its credit with more than 10 lakh plus customer.  They are also offering SMS advisory services, again for limited period of time, which is actually a paid service from them. One can open the demat account freely through online within an hour if you have Aadhar card. Their trading platform Angel Eye is also one of the recommended trading platforms of India.

Read :  More details about Angel broking charges, plans and offers

open Online trading account with Angel Broking now

SAS Online

SAS Online review

SAS Online is online venture of South Asian Stock Limited. They are one of the few brokers charging Zero towards both demat account opening and Annual Maintenance charges. Their brokerage rates are still less than Zerodha at Rs 9 and also have unlimited trading plat at Rs 999/month.

Read : Complete details about the SASOnline brokerage firms

open SAS Online Trading account

  Sharekhan

Sharekhan (Read detailed review of Sharekhan) is household name in India, thanks to their widespread advertisements in both print and visual media. You can find the Sharekhan branches in every major cities and towns of India. They are also opening demat account free of any opening charges. You can also avail of attractive trading plans that suit your needs by just paying the AMC charges that are fully adjustable against brokerage . Their trading platform “Trade Tiger” is considered to be best suited for day trading. 

Related Read : Top 10 Trading platforms of India for various types of traders

  ICICI direct

ICICIDirect pioneered the online Investment culture in India. Their free 3-in-1 demat account can be opened online easily and there is no charges levied for it if you switch from your current broker to ICICIDirect. And the AMC charges are NIL for the first year. 

Read : Detailed review of ICICI Direct and it’s brokerage charges

  Religare online

Religare Securities Ltd. (RSL) is a wholly owned subsidiary of Religare Enterprises Limited. They are one of India’s leading stock broking companies since 1994 and Religare online is web portal of Religare Securities. Religare online has waived off their Rs 1000 demat account opening and Rs 350 AMC charges as limited period offer.

Read : Complete review of Religare Online

  Edelweiss Broking

Edelweiss Broking is a part of Edelweiss Group which is one of India’s leading diversified financial services conglomerates providing a broad range of financial products and services to a substantial and diversified client base that includes corporations, institutions and individuals. They are offering Rs500 worth of Amazon gift voucher on account opening.

Read: Detailed review of Edelweiss Brokerage Charges

  Final thoughts

We started this article with few guidelines and ending with some more!. If you are a small investor with capital less than Rs 2 lakhs, then we advice not to worry about AMC Charges. As per the government guidelines, you account will be considered as Basic Service Demat Account (BSDA). The advantage with BSDA account is, SEBI has fixed Rs 100 as AMC fees for account with Rs50,000–Rs 2,00,000 and NIL for demat accounts with total value of securities less than  Rs50,000. Only if the value crosses Rs 2Lakh, Depository Participants (DP) can charge as per their slabs.

So consider all these aspects before opening any of the free demat account online.  If you already have demat account and want to switch then read this article about procedure to transfer shares from one demat account to another.

Best Demat Accounts in India

Last updated on April 10th, 2017

  Details of Best Demat Accounts in India

Are you just starting out in the stock market?, thats Good. The first step as you may be already aware is to open a demat account with a reputed stock broker. For that, you need to make a list of best demat accounts providers in India as per your requirement.

Best-Demat-Accounts-in-India

Each one will have a different requirements, for example as a beginner one may be interested in opening the account with the broking firm providing lowest brokerage demat account. Or else, probably he/she may also looking for some one who is offering zero account opening charge or lesser Annual Maintenance Charges (AMC). Basically there are two categories of share brokers operating in India namely Discount Brokers and Full service Brokers. If you want to understand each in detail, we suggest you to visit this page.

A word of caution, never and ever open demat account with a broker who is not registered with SEBI. You can easily check whether the broker displayed the registration numbers prominently on his website. 

Read : Benefits of opening a demat account: What are the advantages and disadvantages?

We have written many articles about the demat accounts, in this article we bring you the details of the charges pertaining to some of the top brokers with good track record which may help you in making up your mind.

Following are the 7 Best Demat Accounts in India :

  1)Zerodha

zero-brokerage-zerodha

Zerodha have taken the brokerage industry by storm through their top notch trading platforms, outstanding customer support and highly competitive brokerage fee structure. Many full service brokers are forced to reduce their brokerage fees due to tough competition from Zerodha. It come to the top of our list solely because of the Zero brokerage charges. Yes, they have scrapped the brokerage charges for all the investments and also for delivery based trades (Intraday and derivative will be charged Rs20/order). Their main business revenue comes from derivatives (futures & Options) and probably because of this they might have decided do away with brokerage for delivery. Hence, Zerodha’s demat account will be best suited for the small investors as they can save on brokerage front. Also it is definitely a good fit for investors interested in doing systematic Investing (SIP) in mutual funds.

Read : Detailed Steps to open an demat account with Zerodha


Demat account opening charges – Rs 300 (one time charge)
Commodity account opening charges – Rs 200 (One time charge)
Demat account Annual Maintenance Charges (AMC) – Rs 300 per year


Zerodha Brokerage Charges:
Equity (Intraday Trading Charges) : Rs 20/trade (Maximum brokerage on pays is capped at Rs20)
Equity (Delivery Charges) : NIL (Rs 0)
Futures : Rs 20/trade (Maximum brokerage on pays is capped at Rs20)
Options : Rs 20/trade (Maximum brokerage on pays is capped at Rs20)


Zerodha Positives :
Outstanding Customer Support
Superior Trading tools
Low Brokerage Charges
60 Day challenge – Get your all your brokerage fee back if you remain profitable in 60 days

Zerodha Negatives :
Call and trade is chargeable

Website: www.zerodha.com


Review : Read the complete details about Zerodha Brokerage Charges here


Zerodha Open online Trading Account Button


  2)Sharekhan

sharekhan-demat-accoumt-details

Sharekhan is an Iconic name in Indian Brokerage Industry. If you are looking for full service broker, Sharekhan should be your first choice. They provide wide range of services ranging from Equities, Derivatives, Portfolio management service (PMS) etc. Global giant BNP Paribas has acquired sharekhan on July 30th 2015 for Rs2,200 Crores.  Sharekhan’s trading terminal is called TradeTiger and is considered to be one of the best trading terminal of India.

Sharekhan also frequently conducts Webinars and Workshops on Share market Investment and trading which many new comers find very useful. 

The company spends more than 10% of their revenue on research and on hiring & training for research. This is the reason people trust their research reports and it had been the main factor which established them as on of the top notch brokerage house with 17 years of wealth creation experience.

One of the best part of Sharekhan is that they don’t charge for call and trade facility. unlike discount brokers and other full service brokers who charge around Rs 25 for every call, it is totally free of cost with Sharekhan. This feature come handy in case you are out of internet connection due to some reason. As mentioned previously, if you are a novice to investment world, it is advisable to consider Sharekhan since there is no account opening fees


Trading account opening charges – Rs 750 ( Waived off now as a limited period offer)
Demat account opening charges – NIL (Included in the trading account opening charges)
Demat account Annual Maintenance Charges (AMC) – Rs400 (Free for first Year)
Trading account Annual Maintenance Charges (AMC) – NIL


Sharekhan Brokerage Charges:
Equity (Intraday) : 0.015% to 0.07%
Equity (Delivery) : 0.1% to 0.4%
Futures : 0.015% to 0.07%
Options : Rs 25/lot to Rs 80/Lot


Sharekhan Positives :
Well Known and Established Brand (With huge 13 Lakhs Customers)
Free Call and trade
Attractive Prepaid Schemes to Reduce the Brokerage Slabs
Superb trading terminal

Sharekhan Negatives :
No 3-in-1 demat account


Review : Read the complete details about Sharekhen Brokerage Charges here


button_open-demat-account-with-sharekhan


 

  3)Angel Broking

20_off_On_Brokerage-970x250

Angel Broking is one of the major full service stock brokers of India with number of clients in excess of 10 lakhs.  It has wider outreach with presence in more than 900 cities and 8500 franchises.


Demat account opening charges – NIL
Trading account opening charges – NIL
Demat account Annual Maintenance Charges (AMC) – Varies as per the brokerage plan chosen
Trading account Annual Maintenance Charges (AMC) – NIL


Angel Broking Brokerage Charges:
Equity (Intraday) : 0.0128% to 0.032%
Equity (Delivery) : 0.128% to 0.32%
Futures : 0.0128% to 0.032%
Options : Rs 16/lot to Rs 80/lot


Angel Broking Positives :
Variety of Investment vehicles
Free SMS Advisory
Zero account opening charges

Angel Broking Negatives :
No Brokerage Calculators

Website: www.angelbroking.com


Review : Read the complete details about Angel Broking Brokerage Charges here


open Online trading account with Angel Broking


 

  4)Motilal Oswal

  Motilal Oswal is one of the premier demat account provider in India, started by just two people and now it has grown to acquire 7 Lakh+ customers. Their research papers are believed to be of great insight. motilal oswalAgain, there is no account opening fee with Motilal oswal. Presently the company has more than 1700 business locations with over 7.5 lakh registered customers.


Demat account opening charges – Rs 750
Trading account opening charges – NIL
Demat account Annual Maintenance Charges (AMC) – Rs 450
Trading account Annual Maintenance Charges (AMC) – NIL


Motilal Oswal Brokerage Charges:
Equity (Intraday) : 0.05%
Equity (Delivery) : 0.5%
Futures : 0.05%
Options : Rs 75/lot


Motial Oswal Positives :
Award Winning research reports
Supports more than 60 Banks for fund support

Motilal Oswal Negatives :
Brokerage is on higher side compared to others

Website: www.motilaloswal.com


Review : Read the complete details about Motilal Oswal Brokerage Charges here


 

  5)ICICDirect

icicidirect logo

ICICIdirect is the brokerage arm of the the biggest private sector bank of India, ICICI Bank. It provides the 3-in-1 account, i.e savings bank account, trading account and demat account are integrated to each other and the transfer of funds is seamless and instantaneous. But the brokerage charges are on higher side in comparison to demat account from other brokers.


Demat account opening charges – Rs 100
Trading account opening charges – Rs 975
Demat account Annual Maintenance Charges (AMC) – Rs500
Trading account Annual Maintenance Charges (AMC) – NIL


ICICIDirect Brokerage Charges:
Equity (Intraday) : 0.275%
Equity (Delivery) : 0.55%
Futures : 0.05%
Options : Rs 95/lot


ICICIDirect Positives :
Poineer in online trading
3-in-1 account
24/7 customer support
ICICIDirect Negative :
Not suitable if one is interested in investing penny stocks
Trading platform is chargable
High Account opening charges

Website: www.icicidirect.com


Review : Read the complete details about ICICIDirect Brokerage Charges here


 

  6)Axisdirect

Axis-Direct-brokerage-logoAgain in direct competition with ICICI Bank’s ICICIDirect. Those who have savings bank account with Axis bank normally end up with opening the demat account with them. Brokerage commissions are anyway at par with other 3-in-1 brokers.


Trading account opening charges – Rs 900
Demat account opening charges – NIL (Included in the trading account opening charges)
Demat account Annual Maintenance Charges (AMC) – Rs500
Trading account Annual Maintenance Charges (AMC) – NIL


Axisdirect Brokerage Charges:

Equity (Intraday) : 0.05%
Equity (Delivery) : 0.5%
Futures : 0.05%
Options : Rs 100/lot


AxisDirect Positives :
Good NRI Investment solutions
3-in-1 account

AxisDirect Negative :
Trading platform is chargable

Website: www.axisdirect.co.in


Review : Read the complete details about Axisdirect Brokerage Charges here


 

  7)SBICap Securities

Sbicap-securities-logoSBI Cap is from Largest and oldest banks State Bank of India. Their brokerage charges are on higher side but many investors in India especially the elders prefer to have their demat account opened in a public sector bank rather than private sector bank.


Trading account opening charges – Rs 850
Demat account opening charges – NIL (Included in the trading account opening charges)
Demat account Annual Maintenance Charges (AMC) – Rs350
Trading account Annual Maintenance Charges (AMC) – NIL


SBICAP Brokerage Charges:

Equity (Intraday) : 0.05%
Equity (Delivery) : 0.5%
Futures : 0.05%
Options : Rs 30/lot


SBICAP Positives :
Backed by SBI – Biggest Indian Bank
3-in-1 account for seamless fund transfer
Options brokerage is comparatively cheaper.

SBICAP Negatives :
Call and trade is chargeble

Website: www.sbismart.com


Review : Read the complete details about SBICAP Brokerage Charges here


 

  Procudure to open online demat account

Basically you will need the following documents to open the demat account with any stock brokers of India. 

  • PAN Card (Mandatory)
  • Proof of Indentity
  • Proof of Address

Nowadays, some of the Stock brokers have started opening the online demat account for free within one hour. All one need to do is to upload the scanned copy of the above documents (for KYC purpose) and your demat account will be opened and operational.

You can read more about the detailed procedure on how to open the Demat account in this article

  Conclusion

But please do remember that , demat account is just one part of your investment and the charges associated with it is very minimal when you compare with the ultimate gains that possible through investment in the capital markets.

And also keep in mind to open the demat account with only the reputed and registered brokers. If you are not aware, recently there was case of a broker going bankrupt and investors lost money.

Read :  Unicorn Securities goes Bankrupt : How to be alert about your Stock broker?

  Sharing is Definitely Caring

As they say, there is no single best demat account for every one. India is a diverse country and so are the requirements. That is the reason for existence of multiple brokers in our country with various schemes and brokerage structure. Hope this article helped you to compare plus and minus of some of the leading demat account providers.

And oh yes!, consider sharing this post with your family and friends through the social button on your left/below.

Is It Mandatory to sign Power of Attorney? – Answer is not “YES”!

Last updated on January 12th, 2017

There goes a saying that “You should never ask a barber whether you need a Haircut”!. You can not ever expect your Stock Broker to tell if it is mandatory to give Power Of Attorney. There is lot of confusion and apprehension in India regarding this dreaded document. In this article, we will try to clear some of the doubts and explain the precautionary steps that traders can take if he/she decides to execute the POA. 

Before year 2010, numerous instances of misuse of Power of Attorney by the brokers were reported by retail as well as HNI Investors of India. Brokers simply used POA as blanket to cover up their misdeeds. Armed with POA, franchisees and sub-brokers simply behaved like Jim Carrey below and traded in their client’s account with the sole purpose of generating more and more brokerage and meet their target.

Power Of Attorney

What is Power Of Attorney (POA)?

Simply put Power Of Attorney is a legal document executed by Traders/Investors in the favor of the Stock Broker authorizing him to trade through demat account and access the funds in bank account of the Client(Trader) on Client’s behalf.

Going by the terminologies, at first instance it looks so horrifying that we are giving full control to somebody to manage not only one but two accounts simultaneously, isn’t it?!

Types of Power of Attorney:

Don’t worry, even though we mentioned “full” control, there are different types of POA’s using which one can limit the control handed over. Basically there are two types of Power Of Attorney executed in India

  • General Power Of Attorney:

It is the most dangerous and highly abused Power Of Attorney and hence one should never execute this type of POA, not only for Demat account but also for any other things in life unless it is warranted. With this, the POA holder (Stock Broker) can perform all the activities that the original person (the Client) can do. 

  • Specific Power Of Attorney:

With this, you are restricting the POA holder to perform only certain activities which you feel will not harm you to a greater extent.  Which are the “activities” that we are talking about? We will see it soon.

Why your Broker is insisting to Execute Power Of Attorney?

If you don’t know this already, let us tell you that your demat account is highly secure and regulated account similar to your bank account. Anybody can deposit the securities(shares) to your demat account but cannot debit them without your consent. You can provide your consent by issuing the Delivery Instruction Slip(DIS) which you can think as bank’s cheque leaf that you’ll issue whenever you want to sell shares or want to transfer shares from one demat account to another demat account.

But with the advent of Online Trading, it is not viable to issue the DIS to broker every time you want to sell shares. If your broker is not located in your city, then there is additional overhead of courier charges and risk of loosing DIS. So for all these reasons, POA is generally issued in favor of the broker so that he can debit the shares from your demat account without DIS when you sell them online. Remember that without POA or DIS he cannot sell your shares.

Is Power Of Attorney applicable to all sorts of Accounts?

Also remember that POA is applicable to only Demat account. Question of executing POA for trading account to do trade in Futures and Options (F&O) does not arise at all. If your Brokers insisting you to sign POA for trading account, you know what to do, simply run away from that Broker!!

Now the Big Question, Is it Mandatory to Execute Power Of Attorney?

Absolutely NOT!. It is not compulsory to sign Power Of Attorney and no broker can deny services to you if you wish not to give Power Of Attorney. Earlier to year 2010, Stock Brokers used to compel their customers to sign POA and even refused to open the account if they didn’t sign. As an Investor, you have the choice of deciding whether to give or not to give POA.

Then, why should I even consider giving POA?

As mentioned previously, there are numerous advantages of executing POA. Apart from smooth and hassle free operation of the demat account you as a client will get many benefits such as

  • Trader can pledge shares in his portfolio to get margin to trade in F&O etc
  • Direct Pay in and Pay out of Securities is possible and hence chances of them going into auction is avoided

OK I have decided to sign POA, but is it SAFE to give Power Of Attorney?

Off-course it is safe, SEBI has strict guidelines about POA and bars the POA holder from following activities

  • Broker can not open email account on the behalf of client to receive information about statutory transactions
  • Broker can not execute trades without client’s consent
  • Broker can not open account with any other broker on client’s behalf
  • Broker cannot transfer securities for off market trades
  • Broker can not transfer funds from client’s bank account for the trades executed by client through another stock broker
  • Broker can not merge the balance of the client’s account to clear the debit in another account of the same client.

I have already given POA, can I Revoke it?

Yes, you can revoke the POA at any time by giving in writing to the Broker

What Precaution Should I take when giving the Power Of Attorney:

Following are the Do’s and Don’t regarding Power Of Attorney

    Do’s:

  • Give only Specific type of POA and not the General POA 
  • Confirm the existence of revocable clause in the POA
  • Give POA only to a SEBI registered Broker and not in the name of any particular person 
  • Make sure that you are receiving your transaction information such as contract notes, margin statements and statements of funds and securities
  • Make sure that POA does not have any clause ti transfer the rights in favor of any assignees
  • Review your Bank and demat account statement regularly about the movement of funds and securities
  • In case you notice any discrepancy, immediately take up the issue with your broker in writing and if it persists, escalate it to the exchanges

     Don’ts:

  • Do not authorise opening and closing of accounts using POA
  • Do not authorise off market transactions other than for margin purpose
  • Do not authorise transfer of securities or funds to accounts other than Brokers pool account

Conclusion:

Because of the regulatory steps taken by SEBI, extent of damage because of misuse of Power Of Attorney is greatly reduced. Technically speaking it is not compulsory to give Power Of Attorney to the broker, however in today’s era of online trading it is more advantageous to execute POA provided the outlined guidelines are followed. Hope you liked this post, you can find more such interesting and informative articles at our Archives page. You can also subscribe to our blog post below to receive the next post at your Inbox.

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ISIN Number : What it is? and How to Find it?

Last updated on January 11th, 2017

The code for Infosys in BSE is 500209 and the symbol in NSE is INFY.NS.  This leads to confusion lot of time and even worst in case of lesser known companies with similar names. Isn’t it nice to have a single code to identify shares and even country of the company?. “International securities identification number” is full form of ISIN Number which is an Unique code using which one can easily Identify any security of any (member) country. When we say “security” it includes shares, Bonds, Mutual funds and debentures. India is a member of International Standards Organisation (ISO) which is an independent body responsible for developing standards in various fields like technology, food safety and health culture to name a few. ISO has come up with a standard to Identify each security of its member countries, lets understand format of ISIN number in this article. 

what is ISIN Number

Understanding the ISIN Number Format:

ISIN Code is made up of 12 alphanumeric numbers.  These 12 digits can again be broken down to 3 sections.

  1. Prefix Numbers
  2. Basic digits
  3. Suffix Number (Check Digit)

The prefix is two letter alphabets which identifies the country of the security. The Basic digits consist of 9 alphanumeric numbers, we will see details of these numbers shortly. The Check digit is last digit in the ISIN number and it is used to validate the ISIN number.

Prefix Numbers:

The Country code for India is IN and hence you find all the securities in you demat account starts with number IN. You can find the country code for all the countries from ISIN Country Code Lookup

Basic Digits:

Basic digits consist of 9 alphanumeric numbers which gives more information about the company and type of the security. It will be clear when we understand it with help of an example.

Lets take example of Infosys to understand ISIN Structure

INE009A01021

  • As we already discussed, first two letter IN is country code for India
  • The third letter E is used to identify the issuer Type. Below table list down the code for Issuer type
Sl No Issuer TypeCode
1Central GovernamentA
2State GovernamentB
3Municipal CorporationC
4Union Territories D
5Company, Statuary Corporation , Banking CompanyE
6Mutual FundsF
7Partly paidup SharesG
  • Next four letter, that is 009A is used to identify the company, that is Infosys. Each company is assigned with unique number. It starts from 0001A and goes upto 999F
  • Next two digits, that is 01 in the example are used to identify the type of the security in question like shares, mutual fund or debentures etc. The below table gives the details of the code used to identify the security type
Sl NoSecurity TypeCode
1Equity Shares1
2Postal Savings Scheme2
3Preference Shares3
4Bonds4
5Deep Discount Bonds5
6Floating Rate Boands6
7Commercial Papers7
8Step Discount Bonds8
9Regular Return Bonds9
10Certificate of Deposits10
11Securitised Instruments11
12Debentures12
  • The next two digits, that is 02 in the example are serially issued for the each security of the issuer entering the system

Also Read :  10 Top and Popular Stock Brokers in India

Check Digit:

This section is going to be little mathematical, skip yo next section if you are not interested.

OK, Since ISIN is used for the financial instruments, it is very essential to ensure the correctness of the number itself. Since it is a 12 digit number, there are chances of mistakes in day to day life. However, ISO has introduced the check digit, using which one can identify the correctness of the ISIN number.

The check digit helps in identifying the errors in previous 11 bits. It is calculated using the method called “Modulus 10 Double Add Double”.

Lets calculate the check digit for the Infosys example we have used.

  • Convert letters to numbers by adding 9. For example A=10, B=12,C=13……Z=35                                                            INE009A01021 =>  1823140091001020
  • Separate the digits at Even and Odd Place => Even (1,2,1,0,9,0,1,2), Odd(8,3,4,0,1,0,0,0)
  • Multiply the first group by 2 => (2,4,2,0,18,0,2,4)
  • Now add up all the individual digits of both groups  => (2+4+2+0+(1+8)+0+2+4+8+3+4+0+1+0+0+0) = 39
  • Take the 10 modulo of the sum (i.e find the reminder after dividing from 10) => 30 mod 10 = 9
  • Subtract the result from 10 => 10-9 =1

Since the result matches with the check digit of the ISIN number, we will be sure that the other 11 digits (which are most important fields) are correct.

Who issues the ISIN numbers in India?

In India, the Securities and Exchange Board of India (SEBI) is authorized to issue the ISIN number to the securities. For Government securities or G-Sec RBI is the authorized to issue ISIN

How to find out the ISIN Number?

If you are searching for the ISIN number of a particular security, you can search it using ISIN lookup . Just enter few letter of the company you are searching and you are good to go. Conversely, if you know the ISIN number, you can find out the details of the company.

Where will you use ISIN Number?

As a normal investor/trader, we may not heed much attention to this number as everything happens without our direct involvement. But there are few scenarios, one may have to quote the ISIN number for the transactions such as

Ok, that’s about meaning of ISIN numbers, its format and uses. If you liked the article, consider sharing it through the social buttons below and do let us know your feedback through comments.

 

What is a demat account & How to open it in simple steps?

Last updated on February 7th, 2017

Nowadays, there are many investment avenues available to Indian investor like real estate, Gold, Bonds Etc. But first step for a new entrant to capital markets towards becoming a successful investor is to know what is a demat account and how to open it. It becomes easier to understand the meaning of demat account, if you have a savings bank account in your name (Off course you will!).

What is a Demat account? : Introduction

Meaning of Demat Account

Indian stock markets have history of more than 150 years and until year 1996, all the shares were held in the form of physical certificates. This mode of operation was not efficient due to many of its disadvantages. Advance in technology made it possible to convert them from physical to electronic form.

Definition of Demat Account:Demat Account is an account which is used to hold the securities (Shares, Bonds and Debentures) in electronic form. It is an account much similar to savings bank account where currencies are held by notional value in electronic form.

Where to Open the demat account?

Demat accounts should be opened with one of the two organizations namely NSDL or CSDLThese organisations are called Depositories. But as a retail investor, you can not directly open the demat account with them. One has to go through the intermediaries called Depository Participants(DPs). These DPs are famous as “Stock Brokers/Share Brokers” in general parlance.

Understanding Depository and Depository Participants:

Depositories are created to establish the infrastructure to handle the process of de-materialization and maintain the securities in electronic forms. NSDL was the first depository which was established in 1996. CSDL started its operation in 1999. They have dematerilised more than 2000 crores of physical shares until now!

The organization involved in banking, financial services are eligible to become DPs after the detailed evaluation by Depositories and Securities and Exchange Board of India (SEBI). Some of the major DPs are ICICIdirect, Sharekhan and India Infoline Etc.

Procedure to Open the Demat account:

To open a demat account, one has to follow below steps

  1. Step 1: Approach the DP of your choice and and fill up the demat account opening form
  2. Step 2:Submit all the supporting documents. You can find the list of the required documents below
  3. Step 3: Your documents will be verified and if everything is proper, you will be provide with number called Beneficial Owner Identification Number(BO Number)
  4. Step 4:The entire process will take around 15 days depending upon the DP

Documents required to open a Demat account:

  • Duly filled Demat Account Opening Form along with KYC Application Form
  • Photograph of the individual, to be pasted on the form and signed across
  • PAN card with photograph (mandatory)
  • Proof of Identity: (Any one among Addhar Card, Passport, Voter Id, Driving License)
  • Proof of Address: (Any one among Passport, Voter Id, Driving License, Ration card, Bank statement)

Charges associated with Demat account:

There are various charges incurred by the investor with respect to Demat account, few are one time and others are recurring.

  • Demat account opening fee: This is one time charge levied while opening the account. It varies from broker to broker and nowadays competition is so high that some of them are even opening the demat account for free.
  • Annual Maintenance fee: Just like your debit card yearly charges, maintenance charges for demat account is also applicable and again it depends on the broker. As on today, it varies from Rs300 to Rs700
  • Brokerage: You will incur this charges only when you buy or sell shares. There are many components involved in this like brokerage, service tax, security transaction charges, stamp duty and different cess. Nowadays the discount brokers are providing the brokerage calculator tool using which one can calculate and understand the exact breakdown of the charges he/she is going to incur.  For example, below screenshot shows the breakup of charges for an hypothetical example using the Zerodha Brokerage Calculator

Demat account charges

As this is the most important factor which is going to affect your returns on investment, you should exercise due diligence while choosing the DP(Broker). Do proper research, understand types of brokers like discount brokers, full service brokers etc and most importantly compare various brokers before zeroing on the best broker to match your trading profile. You can use our Comparison tool to do side by side evaluation of two brokers.

  • De-materialization Charges: If one still has shares in physical form (or inherited from ancestors), it can be credited to demat account and there will be nominal fees levied on it.
  • Transfer of shares: If you wish to transfer your shares from one demat account to another account of your own or somebody else, you can do it following simple procedure and there will be some charges for this.

 Read: How to transfer shares from one demat account to another

Is there any limit on number of demat account one can open?

There is no limit on maximum number of demat account a single person can open/create i.e. you can open multiple accounts using a single PAN card with the same or different brokers. But usually most of the DPs have defined their own threshold on the number of account hence you need to check with them. 

Can I open a joint account with my spouse?

Yes, off course!. A demat account can be opened jointly by maximum of three holders. But one will be main holder and other two are considered as joint holders. And a minor can not be a joint holder

Can I open a account for my minor child?

Yes, Demat account can be opened in the name of a minor. The account will be operated by a guardian till the minor becomes major, Guardian has to be the father or in his absence mother. In absence of both, father or mother, the guardian can be appointed by court.

Ok, That’s all regarding the meaning of demat account and how to open it. If you still have any queries, feel free to ask through comments. Hope you liked this post, you can find more such interesting and informative articles at our Archives page. You can also subscribe to our blog post below to receive the next post at your Inbox.

And oh yes!, please encourage by sharing this article through the social buttons on your left/below.

Benefits of Demat Account

Last updated on January 12th, 2017

Just like internet banking made our life simpler, the introduction of dematerlisation concept for securities has solved many problems of Indian Investors and as well as the brokers. There are many advantages and disadvantages of demat account and it all depends upon how the investor/trader adapts to it. The term “Demat account” (full form:”de-material”) refers to the account used for holding the shares of the companies in electronic form instead of physical certificates. In India, it is mandatory to have demat account to trade in the stock markets. It is worthwhile to understand some of the features of demat account and how it is beneficial compared to practices of olden days.

Read :Fascinating history of Indians Stock Markets

Benefits of Demat account

Advantages of Demat Account:

There are many pros of having demat account.

* The biggest being, you can sleep peacefully at night without worrying too much about loosing the certificates due to theft or damage due to fire, flood or in worst case forgery of them without your knowledge
* In earlier times, if you wanted to transfer the shares to you dear one, you were supposed to contact registrar of each company. Imagine if you had 10 shares each of 30 companies!. But Demat has made it easy, you just need to conact your broker and give appropriate instructions for transfer and you are done!.

Read: How to transfer shares from one demat to another demat account

* Do you want to sell one share of SBI?, no issues, you can do that with demat account. But it was not the case with physical securities, wherein you were expected to sell in lots of 50,100 etc (Reason was simple, your broker did not have time to deal with miniscule amount)

* Suppose the company in which you have invested issues the bonus shares,  it will be reflected immediately in your demat account. People used to wait for months to receive them through the post in earlier time.

* Is your contact address changed? then simply contact your broker(dp) and update it.  No need to write to registrar of each and every company,

* There is general feeling in India that, demat account is only for holding the shares of companies. It is not so. One can keep bonds, mutual funds or gold ETFs on NSE/BSE along with shares in a single demat account.

* There is  no stamp duty on transfer of shares which reduces the transaction  costs

* This reason can be considered advantageous or disadvantageous : When you hold shares in physical form, emotionally it becomes difficult to sell them. But through demat account, you can sell them with just click of mouse button!

So if you have some old certificates lying at your house, may be inherited from your ancestors, it is always advisable to dematerialize them. Contact your DP and surrender the shares and your DP will coordinate with NSDL or CDSL to credit them to your demat account.

Disadvantages of Demat Account:

Demat has some cons also, similar to internet banking. If one does not understand them, he may end up paying for the ignorance

* Internet banking user are susceptible to lot of phishing and fraudulent activities. similarly, investor who are not very tech savvy, have to entirely depend upon somebody else and in most of the cases it will be the brokers. And we have seen many brokers misusing the trust of their customers and barred by SEBI.

Read: How to be alert about your broker and what to do if your broker goes burst! 

* And Demat account does not come free of cost. Your broker will charge you yearly maintenance fees and it varies from broker to broker.

* The charges are levied, even if you are not holding a single share!. People normally don’t bother to close the account if they don’t have any plan to operate it and it becomes dormant for years. But at the end, he or his successors end up paying the fees with interest!

It is also possible to convert the shares in the electronic form back again to physical form. This process is called Rematerialisation and for this you need to contact your DP and submit the request. The physical certificates will be dispatched to your contact address.

Also Read:  Details of Top 10 Indian Brokerage Companies

That is regarding the information about benefits of having demat account. Please share you your thoughts through comments. Hope you liked this post, you can find more such interesting and informative articles at our Archives page. You can also subscribe to our blog post below to receive the next post at your Inbox.

And oh yes!, please encourage by sharing this article through the social buttons on your left/below.

How to transfer shares from one Demat account to another

Last updated on January 12th, 2017

With the increase in the entrant of new brokers in India, complaints of misdoings are on rise. In the previous post, we covered how to be alert and take appropriate actions if we sense all is not well with the broker. In this post, We will help you to understand how you can transfer your shares from one Demat account to another, reason may be anything.

* Read : What to do if your Broker goes burst! and How to be Alert!.

Demat transfers

  Difference between Inter and Intra Depository transfers:  

To understand how to transfer shares between two Demat accounts, first we need to understand how your shares are maintained in depository Systems.

In India, two organizations are authorized to hold your shares and they are called Depositories.

             1. National Securities Depository Limited (NSDL)

             2. Central Depository Services Limited (CDSL)

Your brokers will be attached to either one of them and that will define the mode of transfer

  • Intra Depository Transfers (Off market Transfers)- If both Current & new brokers are attached same Depository
  • Inter Depository Transfers- If your Current and new brokers are attached to different Depositories

If you don’t have a demat account yet, you can read our article about How to open a demat account and charges associated with it 

Filling up Delivery Instruction Slip (DIS):

Lets understand with the help of a hypothetical example, say, you want to transfer your shares from ShareKhan  to ICICIdirect account.

You would have received a booklet called Delivery instruction Slip (DIS) when you had opened the account with Sharekhan. It will look something like the one in the below image (click on it to enlarge). Your current broker(Sharekhan) would have already printed most of the details except Target DP (ICICIdirect) and security details.

Delivery Instruction Slip blank

 We have marked the important fields of the DIS slip in the below image (click on it to enlarge)

Delivery Instruction Slip Filled

 Now fill up the relevant details and select either Inter or intra depository transfer as shown in the image.

Explanation for the fields in DIS:

        * Target Client ID – Your client ID of new broker (ICICIdirect) (Ensure it is 16 digit number)

        * Target Settlement details  – N/A

        * Settlement No – N/A

        * ISIN – Shares of the every  company will have unique number (ensure it is 12 digit number starting with IN)

  How to transfer shares from one Demat to another Demat account? 

To transfer shares between two Demat accounts, Follow these steps

  1. Fill up the DIS slip as explained above
  2. Ensure all the fields are correct, especially the target client ID
  3. Submit the duly filled DIS to your Current Broker
  4. Make sure you receive the acknowledgement from the current Broker
  5. Voila! you are done.

Demat share transfer procedure

  How Long it takes to transfer the shares to my new account?

If you submit duly filled DIS form to your current broker, normally it should be transferred to your target account by next business day.

  How much it costs?

Well it varies from Broker to Broker, However the charges are very minimal

  Transfer of shares in case of account closure:

We are mentioning this point explicitly because in case of closure, the transfer of shares to your new Demat is free of charge. Your current Broker is NOT supposed to charge anything for this service.

If you opt to close the account,  then follow the similar procedure we mentioned above and apply for account closure.

  Precautions to be taken with DIS:

The DIS is similar to the cheque book for your Bank account. So please take utmost care of it. Below are the few guidelines regarding the DIS

  • Ensure that your Client ID is printed/stamped on DIS leaflet and not handwritten
  • Ensure that the Target client ID number is correct
  • Do not hand over the blank signed DIS leaflets to anyone to avoid misuse
  • Once the entry is made in the DIS, strike out the remaining rows to avoid misuse
  • If DIS book is lost/stolen, inform the broker immediately to stop processing 
  • You are supposed to return the unused DIS leaflets when account is closed.

Read: Is it Mandatory to sign Power Of Attorney for Demat Account?

  How to transfer shares from one person to another? 

The procedure remains same even transfer is from one person to another. You can transfer the shares to your spouse or any other family members following the similar procedure. 

Also Read: 10 Best Stock Broking firms in India

  Sharing is Definitely Caring!:

Hope you liked this post about transferring shares from one demat account to another, you can find more such interesting and informative articles at our Archives page. You can also subscribe to our blog post below to receive the next post at your Inbox.

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