How to Close Your Demat Account: A Comprehensive Guide

Topics Covered

• Types of Demat Accounts
• Rules and Regulations for Closing Demat Account
• Steps for Closing This Account
• While closing Demat account avoid these mistakes
• Reasons & Impact of Closing This Account
• Impact of Closing This Account
• Pros & Cons of closing a Demat account
• Alternative Investment Options
• Conclusion

At some point, you might want to close your Demat account. Individuals might close their accounts due to inactivity, poor customer service, relocation, consolidation, higher costs, and other reasons. Whatever the reason, there is a facility for closing your account. Read on to understand how to close Demat accounts in India.

Types of Demat Accounts

Before understanding how to close this accounts, you must be familiar with their types. Here are the common types of dematerialisation accounts in India:

Regular Demat Account :

A regular account is available for anyone above 18 years of age. It allows investors to hold a wide range of instruments like stocks, derivatives, and commodities.

BSDA :

It is for small-scale investors or novices. It has a few restrictions related to the trading volume and holding securities.

Repatriable & Non-Repatriable Demat Accounts :

These account for NRIs wanting to invest in Indian financial markets.

BO Account :

A Beneficial Owner Account is for investors opening their accounts with the help of depository participants. For a regular Demat account, you can choose a stockbroker.

Rules and Regulations for Closing Demat Account

• You must submit an account closure request with the respective stockbroker or depository participant.

• The stockbroker or depository participant might ask you to fill out an account closure form online or offline.

• Investors are required to pay all outstanding charges to the depository participant or stockbroker before closing their accounts.

• The identity of the person applying for account closure is verified. Brokers have to ensure that an account holder is closing their account.

• Many investors have their accounts linked with bank accounts. In such a case, the broker might ask you to obtain a NOC from the bank to close it.

There are two procedures for closing a Demat account in India. The first one is the offline procedure, while the second one is online.

Recommended Read:How to open demat Account ?

Steps for Closing This Account

To understand how to close Demat account online or offline, you must be familiar with the generic process, which is:

• Connect with your depository participant or broker and submit an official request for account closure.

• The broker will provide you with an account closure form. You can acquire the account closure form offline from the broker’s office or download it from the official website.

• Provide any additional documents required by the broker for account closure.

• Settle all the outstanding Demat account dues.

• Submit the account closure form to the respective broker or depository participant.

• Verify your identity and successfully close your account.

While closing Demat account avoid these mistakes

• Providing inaccurate information to the broker in the account closure form

• Not paying outstanding account dues

• Not communicating with the Demat account provider in advance for account closure

• Not transferring your securities to another account

Reasons & Impact of Closing This Account

Are you wondering why and how to deactivate Demat accounts? Here are some reasons

• Investors might choose to be inactive

• Investors might switch to another stockbroker for lower Demat account charges

• Closing additional or unused Demat accounts

• Not satisfied with the customer service

• Switching to a better Demat account provider

Impact of Closing This Account

Now that you have understood how to delete Demat accounts, here are the impacts of account closure:

• Effects on Your Stocks and Securities :

  Before closing a Demat account, ensure all securities are transferred to another Demat account. Upon failing to do so, you might not reclaim securities after account closure. It is essential to safeguard your securities before submitting the account closure request with the broker. Often, investors incur financial losses while transferring securities. Investors might decide to sell securities before closing it. When the market rate of securities drops during the transaction, investors suffer a loss.

• How Closing Demat Account Can Impact Your Credit Score :

  There is no direct relationship between Demat account transactions and your credit score. Some investors think that margin trading transactions impact your credit score. Usually, margin trading or brokerage transactions do not appear on credit reports. For the same rationale, there is no impact on your credit score after closing a Demat account.

Pros & Cons of closing a Demat account

Here are some pros of closing a Demat account

• Cost-saving by switching to a better Demat account provider

• Closing additional Demat accounts and arranging portfolio in one place

• Exploring new Demat account providers with attractive features, like margin trading and zero balance facility

Here are some cons of closing a Demat account

• Spending more on paying off outstanding dues

• Spending more on Demat account closure charges

• No medium to hold financial securities in electronic format

• Challenges in re-opening the Demat account

Recommended Read:What is Demat Account ?

Alternative Investment Options

You can still invest in financial instruments without a zero charges demat account. Besides trying the ones listed on stock exchanges, you can try these alternative investment options:

• Mutual funds

• ETFs (Exchange Traded Funds)

• Real Estate

• Cryptocurrency

• NFTs

• Commodities

You must consider a few factors before choosing an alternate investment option. Here’s how to choose an alternate investment option:

• Investment Horizon :

  Are you looking for long-term investments or short-term gains? It is essential to choose the investment option according to your horizon.

• Taxes :

  You don’t want to pay most of your gains to tax authorities. For the same rationale, choose an alternate investment option subject to fewer taxes.

• Investment Goals :

  Ensure that the alternative investment options align with your investment goals.

• Risk Tolerance :

  Do not choose an alternate investment option you cannot afford.

Conclusion

Investors might close Demat accounts due to multiple reasons. To close your Demat account, you must submit a request without your stockbroker or depository participant. It is crucial to ensure that all securities are transferred to another account before closure. You can also try alternative investment options, like NFTs, cryptocurrencies, and real estate. Learn more about Demat account closure now!