Demat account has changed the game of trading. The entire process of investing, trading, holding and monitoring is made faster, convenient, and cost-effective. The depository participant takes care of all the essential documents regarding your investments.
With Demat accounts, you have to pay an amount for making your trading possible. There are different charges- opening charges for a Demat account, safety or custodian fee, Demat account AMC (annual maintenance charges), and transaction fees. Demat facilities increased with more and more competition. Many websites provide free online Demat account opening.
Demat account opening charges:
Previously, the banks used to charge between Rs 700 to Rs 900 as opening charges. Despite the opening charges, Demat accounts require a minor opening charge by the depository participant. Several trusted sites offer free of cost to open a Demat account online. Some banks have special offers to make it easy for investors who are just starting to invest in the stock market.
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Demat account safety or custody fee:
Most depository participants pay the safety fee as one-time charges to the depository. Some of them do not levy any safety fee from the investor for maintaining the account. Depository Participants who charge safety fees do it monthly.
The charges depend on the number of securities held in a Demat account and differ with each broker. The cost usually ranges between Rs 0.5 to Rs 1 for each ISIN (international securities identification number).
Your bank or broker does not charge a custodian fee for the ISIN for companies that have paid the one-time charges to the depository. Before, most DPs charged the clients for both credits and debits to their Demat account. But now most DPs only charge for the debits from your Demat account.
Demat account annual maintenance charges:
The Demat account holder should pay an annual maintenance charge (AMC) to the depository participant (DP) for the services they render. It is also known as folio maintenance charges.
The Demat account AMC charges range from Rs 300 to 900 per annum and should get paid in advance to use your Demat account for the upcoming year. Some DPs may charge quarterly fees, while others charge a lifetime fee of over Rs 2000 and above, depending upon your Demat account.
With the increase in competition to attract clients, many DPs have eliminated Demat account AMC charges for the first year. The depository participants under banks have differential rates for AMC.
Banks that offer three-in-one (Demat, trading & savings) accounts offer lower AMC charges for Demat accounts since the trading account & savings account are linked. But if the trading account is mapped with another bank’s savings account, you may have a higher charge.
Demat account transaction charges:
The ultimate goal of the transactions happening in your Demat account is to make a profit out of it. Your DP may charge a fee for their service for the transactions to help you earn money.
You have to pay the said transaction fee each time financial securities come in or go out of your Demat account. Most of the depository participants charge it monthly. The transaction fees differ depending on the type of transaction that is taking place when you purchase shares, the Demat account is credited, and when you sell shares, it is debited.
Some depository participants may charge only when you sell the shares, while others may do it for incoming and outgoing shares. Even some DPs levy charges based on the number of transactions you have made for the entire month. Several DPs tend to charge roughly Rs 1.5 for each share you trade.
Since we have the advantage of the dematerialization process, the fear of investment and stocks getting lost, stolen, or damaged is no longer a concern. With the help of your DP, everything is taken care of regarding your Demat account.
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