How to manage a demat account efficiently? Here are 5 ways

Several factors contribute to this change, including the rise of mobile trading platforms offering enhanced accessibility and streamlined trading experiences, as well as greater access to financial information for researching listed companies.

Additionally, regulatory initiatives aimed at boosting awareness about stocks, coupled with a growing willingness among young Indians to take on some degree of investment risk, are further driving this shift.

Against this backdrop, there has been a significant surge in demat account additions, with the latest data from the Central Depository Services Limited (CDSL) indicating a nearing milestone of 11 crore demat accounts. While this surge underscores the growing allure and ease of access to demat accounts, it also brings forth an accompanying increase in potential risks.

Also Read: Demat Account: Can it be accessed from anywhere and how safe is it? MintGenie answers

As the landscape of investors and service providers expands, the heightened risk of fraudulent activities and mismanagement becomes increasingly apparent. Consequently, amidst this evolving demat account landscape, investors must prioritise vigilance and implement effective strategies to safeguard their investments from potential threats.

Now, let’s delve into how investors typically embark on their stock investing journey by opening a demat account and explore further steps to protect their accounts.

How to open a demat account?

Before delving into the steps to protect a demat account, it’s essential to understand how to open one. To initiate the process, individuals need to select a depository participant (DP), typically brokerage firms or banks offering demat account services.

Once chosen, individuals can either upload the required documents following the DP’s guidelines or seek assistance from a relationship manager at the DP. Amid stiff competition, many DPs in India are offering demat accounts at no cost. However, DPs typically charge an annual maintenance fee for demat accounts, which can vary.

Also Read: Demat Account: What are the tax implications of transactions?

Upon completing the account opening process, the DP will assign a trading ID number and a demat account number, usually a 16-digit numerical code. Additionally, individuals may be required to sign a Power of Attorney (PoA) at the time of account opening, granting authority to DP to operate a demat account. 

A POA is the authority given by a demat account holder to some other entity to operate his demat account. However, POA is not mandatory to open a demat account. 

Best practices for managing a demat account

Investors should adhere to the following key practices to maintain account security:

Keep personal information updated: Ensure that contact details, including email address, phone number, and mailing address, are up-to-date with the depository participant (DP) to receive important notifications and statements promptly.

Enable two-factor authentication: Opt for two-factor authentication (2FA) for accessing the demat account online. This adds an extra layer of security by requiring a second form of verification, such as a one-time password (OTP), to log in.

Also Read: How to update personal details in my demat account?

Use strong passwords: Choose a strong and unique password for the demat account login credentials. Avoid using easily guessable passwords and consider using a password manager for added security.

Regularly review account statements: Review the demat account statements regularly to verify the accuracy of transactions and holdings. Report any discrepancies or unauthorised transactions to your DP immediately.

Be cautious with third-party platforms: Exercise caution when using third-party platforms or apps to access the demat account. Ensure that these platforms are secure and reputable to avoid the risk of unauthorised access or fraud.

FAQs

How does consistent monitoring contribute to risk prevention in demat accounts?

Regularly monitoring account activity assists in detecting any suspicious transactions or login attempts, enabling prompt action to address potential risks.

What constitutes the demat account number?

The demat account number is a unique 16-digit numerical identifier allocated to investors upon the establishment of a demat account. This number serves as an individualized marker for each investor, representing their financial identity when engaging in trading or investment activities within the stock market.

What protective measures are in place for investors in the event of a DP bankruptcy?

Within a depository system, investor accounts are held in trust by the depository. Consequently, in the event of a depository participant’s (DP) bankruptcy, the holdings registered in the names of the DP’s clients are shielded from the DP’s creditors. In such circumstances, investors have the option to transfer their holdings to an account maintained with another DP.

Also Read: Demat Accounts: How does dematerialisation benefit investors?

Is choosing a DP solely based on low broking fees recommended?

While low broking fees may be a consideration in selecting a depository participant, it should not be the sole determinant. It’s essential to evaluate other factors, such as trading speed, customer support, and service quality.

Will my demat account be frozen by my broker if it remains inactive for an extended period?

If a demat account remains inactive for a prolonged period, the depository participant may opt to freeze it. To reactivate the demat account, investors will need to undergo the e-KYC process once more.

Milestone Alert!
Livemint tops charts as the fastest growing news website in the world 🌏 Click here to know more.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it’s all here, just a click away! Login Now!

Published: 19 Mar 2024, 12:58 AM IST