Demat Account Closing Procedure & Types of Closures

Last Updated: 27 Dec 2024

The Securities and Exchange Board of India has made it mandatory to have a Demat account for those who want to invest in equities. The move is to safeguard the investors and provide them with ease of investing and transparent, hassle-free transactions. The Demat account stores the shares electronically and ensures that the investors can trade in a matter of clicks. However, as an investor can open multiple Demat accounts, it is a possibility that a Demat account with a particular stockbroker may lie dormant. In such a case, the dormant Demat account would incur unnecessary expenses of maintenance fees. Thus, if investors decide to discontinue the Demat account, it is a must to know how to close the Demat account online.

Why should you close Dormant Demat Accounts?

• Dormant Demat accounts are the ones that are inactive and have not seen any transactions for several months. However, the DP or the stockbroker is legally liable to manage the Demat account for investor safety and to keep track if the investor carries out any transaction. Therefore, the stockbroker charges the investors for the services rendered to maintain the Demat account, even if it is dormant. The charge levied for these maintenance services is called the Annual Maintenance Charge, and the investor is liable to pay even in the case of no trading.

  Furthermore, dormant demat accounts are a haven for scammers who engage in a process known as front running. They illegally gain access to dormant demat accounts and buy and sell securities based on insider trading to ensure their demat account is not at the centre of the scam. They may alter the KYC information for the demat account without you knowing such activity, as dormant accounts are rarely monitored.

  Hence, you must know how to close your Demat account online to ensure you incur no unnecessary charges and avoid being a part of a front-running scam.

  Demat Account Closures

  The process of how to close a Demat account includes two types through which you can close a Demat account online. These are:

  Full Account Closure

  You can fully close the Demat account online if there are no holdings and you have made all the pending payments to the DP. Once you have ensured that your Demat account is fully dormant, you can request that your DP close the Demat account.

  Steps For Full Demat Account Closure

  Follow the below steps for closing the current Demat account:

  • Step 1: Download the Demat Account Closure Form from the website of your depository participants, such as a bank or stockbroking firm.
  • Step 2: Fill in the Demat Account Closure form with all the required details and submit it along with all the relevant documents. You can submit the form physically by visiting the nearest branch of your DP or mailing it and the documents to their registered head office.
  • Step 3: Sign the Demat Account Closure Form in the presence of a DP official. If more than one person holds the demat account, the DP will need the signatures of both individuals.
  • Step 4: There must be no shares or negative balances in the Demat account before you submit the closure form.

Transfer and Account Closure

If your Demat account still has some holdings or you haven’t made full payment for the pending charges, you have to first transfer the holdings and the pending payments to a different Demat account. Once the holdings and charges are transferred, you can request that the DP close the Demat account.

Steps For Transfer and Account Closure

If a share transfer is pending from one Demat to another, you can close or delete your Demat account.

• Step 1: If you are transferring shares between the two depositories (NSDL and CDSL), you will require an Intra DIS slip and choose the ‘Off-Market transfer option’ in the current Demat account.
• Step 2: You must acquire the original Client Master List (CML) from the Demat account with the stamp, signatures and logo.
• Step 3: Afterwards, you must mention the names of the shares you wish to transfer along with their ISINs and other relevant details. Furthermore, you must state the target client with their 16-character code ID.
• Step 4: Once you complete the form, submit the documents to your DP’s office physically or by sending the form and documents through mail to their registered head office.
• Step 5:You must self-attest the Demat Closure form from a verified bank official. Once the form is successfully submitted, the DP will close or delete your Demat account.

How To Close Your Demat Account? The Do’s and Don’ts

To close a Demat account online, you must understand the process of how to close a Demat account. Most of the broking firms have an online process on their website to close a Demat account. However, some may even ask you to submit a letter in person requesting closure. Therefore, carefully read the whole closure process beforehand to be prepared.

Check if your broking firm provides any official closure form. This could be available to download from your broking firm’s website. This form will ask you to fill in all your personal and account identification data. This is how your broking firm ensures your authenticity. Submit the duly signed closure form along with the required documents to process the closure. While requesting to close your Demat account, don’t forget to check on the following:

• Ensure that there are zero holdings in your account. Sell any remaining shares before closing your account.
• Ensure that your Demat account does not have any negative balance. You can check these details by logging into your account online by contacting a registered branch of your brokerage.
• Ensure you download the ‘Account Closure Form’ and other important paperwork which will be necessary for you to submit when you request for Demat account closure.

How to Deactivate your Demat Account?

To learn how to close your Demat account, you have to understand the process of deactivating the Demat account. Fill up the account closure form by adding your latest information. Usually, if more than a single person operates a Demat account, all of the holders are necessitated to sign the account closure form in the presence of a DP (depository participant) from the broking firm. Hence, this process may have to be undergone at the broking firm’s branch office or the bank.

If at all, you wish to close your Demat account with some holdings in it. The closure process remains the same. You still will have to fill up the closure form. However, there will be an additional delivery instruction slip (DIS) or a similar document that you must fill to transfer your securities to a separate Demat account. Both accounts should usually have the same account holders.

You may be required to submit a client master report from a central depository of your new Demat account where you wish to transfer any preexisting securities. Usually, with this document, a stamp, logo, and signature are also required. There may be other KYC documents required. These documents need to be submitted to your DP’s head office .Your request will be processed upon submission.

Details Required for Closing a Demat Account

To close a Demat account online, you would need to present or submit some legal documents to mark your ownership over the Demat account and its holdings. The details required for closing a Demat account are as follows:

• Your Demat account’s ID as well as your DP ID.
• Your KYC details, such as your name and addresses, are supposed to match those present in your account’s records.
• Your reason for closing your account at this moment.
• A verified and self-attested identity proof copy such as Aadhar, PAN, or passport. This may vary depending on the broking firms.

How Long Does it Take to Close a Demat Account?

Closing a Demat account generally takes 7 to 15 business days, depending on the depository participant and the completeness of the closure request. It starts when you submit an account closure request along with all the necessary documents, including identity proof and a request form. 

If there are no securities or pending transactions in the account, it is usually quicker. However, if there are assets or dues pending, you may need to clear them before the closure. It is recommended that you follow up with your DP to ensure the process goes smoothly.

Reasons and Impact of Closing Demat Account

Different people might have various reasons to close their Demat accounts, which can include the choice to go for another depository participant or discontinue use. People also have the option to merge the existing holdings of the Demat account by closing inactive and redundant accounts to minimise unwanted AMC every year. 

In doing so, it affects them with a loss in accessibility of securities if already held, without the means to transfer it elsewhere. Also, if you have stocks, bonds, or mutual funds, you will have to transfer them to another account or sell them before closing. Closing an account might also affect your historical transaction records, which may be required for future reference.

Conclusion:

As set forth above, closing a Demat account is quite simple. There are minimal steps involved and no additional charges to close your account. Closing an inactive account as soon as possible can save your money as your annual maintenance charge will cease. Now that you know the process of how to close your Demat account, you can process the process and avoid unnecessary charges and potential stock market scams.

Frequently Asked Questions

Do I have to close the trading account with the Demat account?

A dormant Demat account will attract unnecessary Annual Maintenance Charges and may be targeted by front-running scammers.

Can I close my Demat account online?

No, you need to visit the office of the DP with the account closure form and documents or send them through mail to their registered head office to close the Demat account.

Can I choose not to close my Demat account?

You can choose not to close your Demat account. However, it becomes inactive if you have not used it for trading for 6 months to 1 year.

How can I check holdings or negative balances before closing the Demat account?

You can check your holdings and negative balance by logging into your account online by contacting a registered branch of your brokerage.

What happens if I do not close my Demat account?

If you do not use your Demat account, it may incur annual maintenance charges (AMC) every year, and the securities you hold in that account may remain there until you transfer them or sell them.

How do I know if my Demat account is closed?

In order to confirm whether your Demat account is closed, look for a closure confirmation from your depository participant. You can also ask for the final statement or check the account status through the online portal of the DP or contact their customer service.

What are the charges for closing the Demat account?

Generally, there are no charges for closing a Demat account, although some depository participants charge a nominal amount for account closure. It is, therefore, recommended to enquire with your DP regarding the closure charges.