How to Transfer Shares From One Demat Account to Another?

These days, Indian retail investors are looking beyond traditional investment assets like gold and real estate. Since 2016, the stock market has provided greater returns than gold and real estate. This has not escaped the attention of perceptive Indian investors. The easy accessibility of trading on the stock market with the help of a Demat and Trading account has also contributed to their inclination for investing in stocks.

Demat Accounts - i.e., Dematerialized Accounts - make it very convenient for the common man to electronically trade stocks, while digital trading accounts help investors buy and sell stocks quickly.

In 2018, 3.5 million Demat accounts were opened in India. This was the highest number on record ever since SEBI started releasing data in 2011. In 2019, the very next year, this record was overtaken - 4.1 million new Demat accounts were opened.

Some of the new entrants may open more than one Demat account in the beginning. Later on, such multiple account holders may need to move shares from one Demat account to another. There are many reasons for why they may need to do so, ranging from asset consolidation to shifting investment strategies. These reasons are explored in some detail below.

Why you may need to transfer shares from one demat account to another:

Consolidation:

In the beginning, people like to get a feel for the interface and services of different brokers. Later, they select a broker that best aligns with their financial goals and investment strategies, and carry out all future transactions through them. At such a time, it is recommended to move shares from the non-active Demat accounts to the active one. Keeping your assets in one place leads to better management and improved investments over time.

Changing Brokers:

There are two different types of brokers in India: discount brokers, and full-service brokers. Discount brokers charge very little fees, and provide the minimal service of facilitating the buying and selling of shares. Full-service brokers charge higher fees, but provide more resources like personalized recommendations, real-time market research, industry analyses, etc. A change in your investment strategy may need you to shift from one type of broker to another, thereby requiring a transfer of shares from one demat account to another.

If you need to move shares from one Demat account to another, you need to know about depository systems. In India, there are two depository systems:

  • National Securities Depository Limited (NSDL)
  • Central Depository Services Limited (CDSL)

These two depositories are the accredited bodies to hold stock market shares for the account holders. Two types of transfers are possible:

Manual Transfer:

This mode of transfer involves filling physical forms. If the two Demat accounts in question are in the same depository, then the shares do not circulate back in the market. This is why such a transfer is called off-market, or Intra-depository transfer. If the two Demat accounts are in separate depositories, then the transfer is called an Inter-depository market. An account holder needs to follow the following steps to carry out either of these transfers:

  • This mode of transfer involves filling physical forms. If the two Demat accounts in question are in the same depository, then the shares do not circulate back in the market. This is why such a transfer is called off-market, or Intra-depository transfer. If the two Demat accounts are in separate depositories, then the transfer is called an Inter-depository market. An account holder needs to follow the following steps to carry out either of these transfers:
  • Collect a Debit Instruction Slip (or DIS booklet) from your depository participant(DP). This is the brokerage firm that your Demat account is registered with.
  • Put down the names as well as the ISIN number of the equities, debts, stocks, etc that you need to move from one account to another. ISIN stands for International Securities Identification Number - it’s a 12 digit code that is used to validate the identity of financial securities.
  • Put in the Target Client ID, which is a 16 character code that combines the client’s ID with the DP’s ID.
  • Select the mode of transfer. If both the DPs are registered with the same depository, then select Intra-Depository or Off-market transfer. If the DPs in question are registered with different depositories, then select Inter-Depository transfer.
  • Submit the filled-in DIS form to your existing broker, and do not forget to get an acknowledgement receipt from the broker

That’s it. The broker will process the transfer in 3 to 5 days.

Online Transfer:

People also have the option to transfer shares from one Demat account to another online. Follow the steps given below to transfer your shares from one account to another from the comfort of your home:

  • Visit the CDSL website.
  • Click on the register online link and fill-in the form that comes on the screen.
  • After completing the form, click on “Print Form”.
  • This will initiate a transfer of the form to your Depository Participant(DP) in question.
  • The DP will verify your form, and send a password to your registered email address.
  • The password can then be used to register onto the myeasi (Electronic Access to Securities Information) platform, and the account holder can initiate a transfer of shares by themselves.

Conclusion

The transferring of shares from one account to another is, thus, a simple and easy process, once you have the above steps down pat.

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