Types of Demat Accounts

In India, to trade or invest in the securities market, you need a Demat account to store your shares and other securities in a dematerialised form.

As per the Depository Act of 1996, the SEBI mandated converting physical shares and other security certificates into digital formats and managing them from a Demat account. In India, depending on investors’ type, there are several types of Demat accounts available for you.

Read this blog and discover the features of different Demat account types and learn which one is right for you.

Understanding the meaning of Demat Account

The concept of a Demat account is quite similar to that of a regular bank account. You deposit your cash into your bank account, and instead of storing cash, a Demat account stores your shares and other security certificates electronically.

Dematerialisation replaced paper-based trading and introduced Demat accounts, where you can store your investment securities, like shares, mutual funds, ETFs, etc.

It safeguards your securities from loss, damage, theft, fraud or forgery and makes the investment process easier.

What are the Different Demat Account Types?

If you are an investor or new to investment, you might be eager to know the types of Demat accounts available in India. Here are some detailed explanations of different types of Demat accounts:

1. Regular Demat Account

   It is the most common Demat account type and popular amongst the resident Indian investors. If you are a resident Indian, you can use this account and hold multiple securities. They include stocks, mutual funds, bonds, ETFs, and other similar investments.

   There is no upper limit on the amount of securities you hold in a Demat account. Depending on your Depository Participant (DP), you must pay an AMC charge annually to the DP.

   However, there are some criteria you must meet, such as being 18 years old or older. You also should have a valid PAN card, an Aadhaar Card, and an active bank account to transfer money generated from investments or trades.

2. Basic Service Demat Account or BSDA

   If you are an infrequent investor, the BSDA is suitable for you. As the name suggests, it is a basic version of a regular Demat and is also for resident Indians.

   One of the main advantages of this account type is its lower AMC. Furthermore, if your holding value in your BSDA does not cross INR 50,000, your DP will not levy an AMC on you.

   However, you can have only one BSDA under one PAN, and you cannot have a joint BSDA. Also, you can hold assets of more than INR 2 lakh in your BSDA.

3. Repatriable Demat Account

   It is one of the types of Demat accounts, dedicated to Non-Resident Indians or NRIs. If you are an NRI, this account type lets you invest in the Indian securities market in a similar way to resident Indians.

   With this account type, you can transfer funds generated from investment or trade activities abroad. A repatriable account aligns with the Foreign Exchange Management Act (FEMA) for mandatory compliance or regulations.

   For eligibility, you must be an NRI, Overseas Citizen of India (OCI) or Person of Indian Origin (PIO). Also, you need an NRE account, a PAN and an address proof of overseas residence.

4. Non-repatriable Demat account

   A non-repatriable account is almost similar to a repatriable account and is meant for NRIs. However, as an NRI investor, you cannot transfer funds overseas generated from the securities market.

   This type of Demat account allows you to share funds between domestic bank accounts in India. You must have an NRO bank account along with a passport, PAN, overseas address proof and other KYC documents to open this account.

Conclusion

As an investor, you need to learn about the different types of Demat accounts in India to invest in the securities market. The types of Demat accounts include a basic and regular Demat account for Indian residents. NRIs, depending on their fund transfer requirements, can choose between the repatriable and non-repatriable Demat types.

FAQ’s

1. What type of Demat account should NRIs opt for?

It depends on the requirements of the NRI who is looking forward to investing in the Indian securities market. If you are an NRI investor and need your funds transferred abroad, choose a repatriable account. Choose the non-repetitive account if you do not want a fund transfer.

2. What are the charges associated with different types of Demat accounts?

Most DPs open a Demat and a trading account for you without charging any money. However, you need to pay an annual AMC to maintain your account with your DP, and the amount varies. Other charges include transaction fees, security transfer charges, etc.

3. How can I convert my Regular Demat account to a BSDA?

You can convert your regular Demat to a BSDA by placing an account modification request to your DP. The DP will verify and convert your account within a few days. However, you must be the primary account holder of the account, do not already have a BSDA, and the value of the security is under INR 2 lakh.

4. What is the minimum balance required for different Demat accounts?

There is no fixed minimum charge you need to maintain in your Demat account. Hence, you can keep it empty without any restrictions. However, you must add an amount of the AMC to your account for your account maintenance.