Demat is an electronic platform for holding and transferring shares and also for corporate actions. The onus is on you to exercise due diligence in operating your demat account. Here are 5 ideas to make you safe.
Validate credit into demat account on T+2 day
When you purchase shares on T-date, you must get the credit into your demat account by T+2 date. There are occasions like an auction due to short delivery, which may take a couple of days more. Otherwise, the shares must come into your demat account on T+2 day. At times traders ask brokers to keep the shares in the pool account for margin to trade in F&O. While that is common practice, understand the risk here. If you are not able to cover trading losses, the broker is authorized to sell shares from your account to recover the loss. It is always better to get the shares into your demat account first.
Demat account has costs that can cascade
Brokers often advertise free demat account but demat account opening is free anyway. The real cost comes in the form of the annual maintenance charges (AMC) and the charges when shares are debited to your demat account. Avoid holding too many demat accounts. Ideally, 2 or 3 demat accounts should be enough. More demat accounts you have, the more costs you incur. In case your portfolio value is less than Rs2 lakhs, make an application for a Basic Services Demat Account (BSDA), which attracts lower AMC costs.
Never leave signed DIS booklets with the broker
Your Debit Instruction Slip (DIS) booklet is like your cheque book. Let it not fall into wrong hands and don’t leave signed DIS with your broker. That may appear to be convenient but you are just inviting unscrupulous actions. The best way is to only sign the DIS when you need to issue one. Avoid leaving your DIS booklet lying in the open and ensure that you only accept DIS booklets stamped by the DP with the unique form number and have the DP and client name printed on it.
Leaving your demat account idle could mean trouble
If you are going to leave your demat account idle due to your international travel for a longer period of time, you can ask your broker to freeze your demat account. During the freeze period there can be no debits to your demat account but all corporate actions like bonus, dividends, splits, etc. will continue as normal. Once you are back, you can just unfreeze your demat account with an application and start using it like a normal demat account. It ensures safety of your holdings in your absence.
Update your latest coordinates on a regular basis
If you change your address, email id or mobile number, immediately intimate your DP. Most authentications nowadays are done with intimation to one of these coordinates. The last thing you want is your portfolio details falling into the wrong hands. Updation of details hardly takes any time but it really builds a safety net against losses.
Most demat losses happen due to laxity in use of DIS booklets, updating coordinates and not freezing your demat accounts. These small steps can keep your demat account safe.