Online trading has gained momentum by leaps and bounds, thanks to the easy accessibility of stock markets. The digitisation of the stock trading system started with the introduction of dematerialised or demat accounts decades ago. It is a demat account that makes it possible for retail traders to access the stock market without hassles.
An Introduction to Demat Account
A demat account is an online repository that enables market participants to store all their financial assets electronically. Whether an individual intends to invest in stocks, bonds, government securities, exchange-traded funds, mutual funds, or insurance, a demat account can store the assets in one place. It has eliminated all risks and hassles of handling paper-based securities.
With the introduction of the online trading system in India, stock exchanges deal with digital securities only. Therefore, opening an online demat account to hold and maintain financial securities digitally.
If anybody holds old share certificates in paper format, these securities can not be traded any further. The investor needs to convert those shares into a digital format using a demat account.
What are the Demat Account Opening Charges?
Demat accounts are not subject to any fixed account opening charges. The account opening charges may vary from broker to broker but within the range specified by the capital market regulator SEBI (Securities Exchange Board of India).
To know the demat account opening charges, understand two types of brokers:
- Full-service Stockbroker
Most full-service brokers charge a demat account fee. These brokers offer additional services other than demat and trading services, like financial planning services, portfolio management, wealth management, dedicated relationship managers for customised portfolio support, etc. They operate from several offices and branches across the country. Individuals have the option to visit them for assistance. Their fees are high as per their service offering. The advisory service makes up a significant part of their demat account opening charges.
- Discount Stockbroker
Discount brokerage firms can offer a demat account for free. Discount brokers came into existence to meet the rising needs for demat services and online trading. They facilitate online demat and trading accounts primarily. Since these brokers may not offer additional services, like full-service brokers, their charges are considerably low. They focus on improving their trading platforms.
Individuals can open their demat and trading accounts with a renowned discount broker to save on investing costs.
Other Demat Account Charges
- Annual maintenance charges (AMC): Stockbrokers charge a nominal fee for the demat services rendered to their clients. It is a nominal amount and varies from broker to broker.
- Transaction Charges: Each time a debit and credit transaction of financial securities takes place, the demat account holder needs to pay a transaction fee. Many stockbrokers charge a monthly fee at a flat rate. Depending on the broker, they may charge the debit transaction fee only.
- Safety or Custodian Fee: It is a monthly fee charged by stockbrokers depending on the number of securities one holds in their Demat account. If an investor holds shares of a company that has paid this fee to the depository, the broker will not charge custodian fee for these shares.
Discount Brokers for Lowest Demat Account Charges
Discount brokerage firms are known for their cost-effective demat and online trading services. Therefore most beginners and active traders in the stock market prefer these brokerage firms.
- Discount brokers allow free demat accounts with their subscription-based brokerage plans.
- Renowned discount brokers do not charge AMC from their subscribed customers.
- There will be no subscription charge for the first year for basic brokerage plans.
- Many discount brokers do not charge any custodian fees from their clients.
Thus, with the ease of account opening in this era of new-age technologies and reduced demat account charges, there is an increase in the number of demat account holders in India. Find the right broker to open a demat account with lowest charges.