Share Investment : Free Demat Account Suited for Irregular Users

Securities and Exchange Board of India’s (SEBI) move to introduce no-frills (Free) demat accounts have been greeted with much enthusiasm amid players though it means a higher cost for the depositories. This is because many irregular investors simply chose to close down the account & shifted to less cumbersome instruments such as fixed deposits or / physical gold.

This, along with the one page KYC (know your customer) document that was introduced in January, 2012 for opening of demat accounts, will make investing in stocks & gold exchange-traded easier.

For an individual, the new charges are quite low. There won’t be any annual maintenance charge (AMC) for balances of zero to Rs. 50,000. The no-frills account will charge Rs 100 for a balance of Rs. 50,001 to Rs. 2 lakh. Now, DPs (depository participants) such as banks & brokerages charge anywhere between Rs.300 and Rs. 500 as AMC regardless of the amount in the account.

 In fact, several investors may just keep accounts dormant & use them when overall markets or / gold ETFs are doing well. Many opted for physical gold because of the cumbersome process and cost factor – something that SEBI has eliminated.

Some disagree that things will improve substantially. Because existing demat accounts holding, with less than Rs. 50,000, will get automatically converted into a Basic service demat account (BSDA) from October 1, 2012. Thus, the business for DPs will be impacted. So, if a depository participant earned Rs. 300 from your account a year, he will lose that once your account becomes no-frills.

Cost of Demat Account Services

Name    Account opening*         AMC** (Rs)     Additional account statements (Rs)

ICICI Bank                   Nil            450^ - 500 )                   20
SBI                                 Nil          350 ^ - 400                      30
Angel Broking                Nil          300                           25
IIFL                        Nil            250 - 555                     Nil
Geojit BNP Paribas Nil            400                                25
No frills accounts         Nil      Up to 50,000 = Nil 
                           50, 001 to 2 lakh = 100 up to 25

*Stamp duty of Rs 20 and stamp paper of Rs 50 for power of attorney.
** AMC - Annual maintenance charges , ^ for e-statements

Most of analysit said, ''Free Demat Account Suited for Irregular Users..!"

Src: BS

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