What are the benefits of participating in a depository?
The benefits of participating in a depository are:
- Immediate transfer of securities.
- No stamp duty on transfer of securities.
- Elimination of risks associated with physical certificates such as bad delivery, fake securities.
- Reduction in paperwork involved in transfer of securities.
- Reduction in transaction cost.
- Nomination facility.
- Change in address recorded with DP gets registered electronically with all companies in which investor holds securities eliminating the need to correspond with each of them separately.
- Transmission of securities is done by DP eliminating correspondence with companies.
- Convenient method of consolidation of folios/accounts.
- Investments in equity, debt instruments and Government securities held in a single account.
- Automatic credit of shares, arising out of split / consolidation / merger etc., into demat account.
What are the facilities offered by DP account?
Following facilities are offered:
- Dematerialisation i.e., converting physical certificates to electronic form.
- Rematerialisation i.e., conversion of securities in demat form into physical certificates.
- Facilitating repurchase / redemption of units of mutual funds.
- Electronic settlement of trades.
- Pledging/hypothecation of dematerialised securities.
- Electronic credit of securities allotted in public issues, rights issue.
- Automatic receipt of non-cash corporate benefits such as bonus, in electronic form.
- Freezing of demat accounts, so that the debits from the account are not permitted.
- Nomination facility.
- Services related to change of address.
- Transmission of securities.
- Other facilities viz. holding debt instruments in the same account, availing stock lending/borrowing facility, etc.
Can I open more than one account?
There is no restriction on the number of accounts you can open.
Do I have to keep any minimum balance of securities in my account?
No. The depository does not prescribe any minimum balance. You can have zero balance in your account.
Can I open a single account for securities owned in different ownership patterns such as securities owned individually and securities owned along with my spouse?
No. The demat account must be opened in the same ownership pattern in which the securities are held in the physical form. e. g. if one share certificate is in your individual name and another certificate is jointly held in your and your spouse's name, two different accounts would necessarily have to be opened.
What do I do if I have physical certificates with the same combination of names, but the sequence of names is different? That is, some certificates with husband as first holder and wife as second holder and other set of certificates with wife as first holder and husband as the second holder?
In this case you may open only one account with husband and wife as the account holders and lodge the security certificates with different order of names for dematerialisation in the same account. You will have to fill-up an additional form called "Transposition cum Demat" form. This would help you to effect change in the order of names as well as dematerialise the securities.
Can someone else operate my account on my behalf on the basis of a power of attorney?
Yes. If you authorise any person to operate your account by executing a power of attorney and submit it to your DP, that person can operate the account on your behalf.
Why should I give my bank account details at the time of account opening?
This is to protect your interests. Your bank account number will be mentioned on the interest or dividend warrant, you are entitled to, so that these warrants cannot be encashed by any one else. Further, a bank account number is mandatory to open a DP account.
Can I change details of my bank account?
Yes. In the depository system, monetary benefits on your security balances are paid directly into the bank account as per the details provided by you at the time of opening the account. Hence you must ensure that you inform your DP of any subsequent change in bank account details.
What is 'Standing Instruction' given in the account opening form?
In a bank account, the account is credited only when a 'paying in' slip is submitted along with cash/cheque. Similarly, in a depository account 'Receipt in' form has to be submitted to receive securities in the account. However, for the convenience of investors, the facility of 'standing instruction' is provided. If you say 'Yes' for standing instruction, you need not submit 'Receipt in' slip every time you buy securities.
Can I operate a joint account on "either or survivor" basis just like a bank account?
No. The demat account cannot be operated on "either or survivor" basis like the bank account.
Can I add or delete names of account-holders (second or third account-holder) after opening the account?
No. Names of the account-holders for a depository account cannot be changed. If you want to change name or add / delete an account-holder, you need to open a new account in the desired holding pattern (names) and transfer the securities to the newly opened account. The old account may subsequently be closed.
What should I do if my address is changed? Do I need to write to each company separately?
In case you change your address, you need to inform only the DP of the new address DP. When the DP updates the new address in the system, it will be automatically conveyed to all companies in which you hold shares.
Who can make use of the nomination facility?
Nominations can be made only by individuals holding beneficiary accounts either singly or jointly. Non-individuals including society, trust, body corporate, partnership firm, karta of Hindu Undivided Family, holder of power of attorney cannot nominate.
Are joint holders of accounts allowed to nominate?
Nomination for joint holders is permitted, however in the event of death of any of the holders the shares will be transmitted to the surviving holder's name. In the case of death of all holders the securities will be transmitted to the nominee account.
Can an NRI nominate?
Yes, an NRI can nominate directly. But, the power of attorney holder cannot nominate on behalf of an NRI.
Can a minor nominate?
No, a minor cannot nominate either directly or through its guardian.
Who can be a nominee?
Only an individual can be a nominee. A nominee cannot be a society, trust, body corporate, partnership firm, karta of Hindu Undivided Family or a power of attorney holder.
Can there be more than one nominee?
No, only one nomination can be made per depository account.
Can a minor be a nominee?
Yes, a minor can be a nominee. In such a case, the guardian will sign on behalf of the nominee and in addition to the name and photograph of the nominee, the name, address and the photograph of the guardian must be submitted to the DP.
Can separate nomination be made for each security held in a depository account?
No. Nomination can be made account wise and not security wise.
Can a NRI be a nominee?
Yes, a NRI can be a nominee subject to the exchange control regulations in force.
What is the procedure for nomination?
To nominate the account holder(s) must fill nomination form containing their signatures along with the signatures and photographs of the nominee and signatures of two witnesses. In case if the nominee is a minor then the signature and the photograph of guardian will also be required. This form can be submitted to DP at the time of account opening or at the later date even after the account is opened.
Can the nominee be changed?
Yes, the nomination can be changed by the account holder/s anytime, by simply filling up a new nomination form and submitting the same to the DP.
What does transmission mean in relation to demat accounts?
In transmission, the securities of the deceased account holder will be transferred to the account of surviving holder(s)/nominee/legal heirs of the deceased account holder. This process is simpler in case of dematerialised holdings as it can be completed easily by submitting relevant documents to DP.
What is the procedure for transmission of securities to the nominee in case of the death of the sole account holder?
In the event of death of sole holder, the nominee has to submit various documents such as transmission form, notarised copy of death certificate and an affidavit in the prescribed format to the DP for the purpose of transmission of securities. After verifying these documents and if found in order, the DP will transmit the securities to the account of the nominee.
What would happen if no nomination is made for the account?
In case a nomination is not made by the sole account holder, the securities would be transmitted to the account of the legal heir(s), as may be determined by an order of the competent court. However in cases where the value of securities to be transmitted is less than Rs. 1,00,000/- the DP may process the request based on submission of necessary letter of indemnity, surety, affidavits and "No Objection Certificates" documents.
What is the procedure for transmission in case of Joint Accounts?
On submission of Transmission form and a notorised copy of death certificate of the deceased joint holder(s) in the event of death of the joint holder(s), the securities will be transmitted to the surviving holders account. However for transmission of securities, the account of the surviving holder(s) must be in the same sequence in which the names appear in the joint account to be closed.
What do you mean by dematerialisation?
Dematerialisation is a process by which physical certificates of a beneficial owner are converted into an equivalent number of securities in electronic form and is credited to his account with its DP. For this process to happen the beneficial owner will have to open an account with a DP and have to submit Demat Request Form (DRF) and physical certificates to the DP. The beneficial owner can submit securities for dematerialization provided the holders in the certificate and the account is in same order. The investor has to ensure that before the certificates are handed over to the DP for demat, they are defaced by marking "Surrendered for Dematerialisation" on the face of the certificates.
Can I dematerialise any share certificate?
You can dematerialise only those certificates that are already registered in your name and are in the list of securities admitted for dematerialisation at NSDL.
What precautions should I take before defacing a share certificate?
The securities should be available for dematerialisation before it is defaced, therefore you should take due care in finding out with DP whether the ISIN (code number for the security in a depository system) has been activated and made available for dematerialisation by the depository. If the certificates are available for dematerialisation you should submit DRF and physical certificates to the DP.
How long does the dematerialisation process take?
Dematerialisation normally takes about 30 days.
Can my electronic holdings be converted back into certificates?
Rematerialisation is a process of converting electronic holdings back into certificates. You will have to submit a Remat Request Form (RRF) to the DP who will generate a RRN and will forward the request to the registrar. The Registrar will print the certificate and forward it to the investor.
What do you mean by 'Market Trades' and 'Off Market Trades'?
Any trade settled through a clearing corporation is termed as a 'Market Trade'. These trades are done through stock brokers on a stock exchange. 'Off Market Trade' is one which is settled directly between two parties without the involvement of clearing corporation. The same delivery instruction slip can be used either for market trade or off-market trade by ticking either one of the two options.
What settlement details are required on the delivery instruction slip?
On every stock exchange, various settlements are effected every day such as daily settlement, auction settlement, etc. Each of these settlements is identified by a combination of a market type and a settlement number. You are required to mention the appropriate settlement details on the delivery instruction slip while transferring the shares to your broker's account. These settlement details are available on the contract note issued by the broker.
How would I get my dividend / interest or other cash entitlements?
The concerned company obtains the details of beneficiary holders and their holdings from NSDL. The payment to the investors will be made by the company through the ECS (Electronic Clearing Service) facility or by issuing warrants on which your bank account details are printed. The bank account details will be those which you would have mentioned in your account opening form or changed thereafter.
How would I get my bonus shares or other non-cash entitlements?
The concerned company obtains the details of beneficiary holders and their holdings from NSDL. Your entitlement will be credited by the company directly in your NSDL depository account.
How will the investor confirm that bonus/rights entitlement is credited into the account?
The issuer R&T agent for bonus/rights issue would send an allotment advice to the investor and the DP would send a transaction statement showing credit into his account. The investor can confirm his entitlement by comparing the quantity shown in the advice and statement of transaction given by his DP.
Can I freeze my account?
The system provides the facility to freeze the depository accounts for any debits or for both, debits and credits. In an account which is "freezed for debits", no debits will be permitted from the account, till the time it is unfrozen.
What are the different securities available for dematerialization?
Shares, scrips, stocks, bonds debentures, debenture stock or other marketable securities of similar nature of any incorporated company or body corporate including underlying shares of ADRs and GDRs. Units of mutual funds, rights under collective investment schemes and venture capital funds, commercial paper, certificate of deposit, securitised debt, money market instruments and unlisted securities are the securities available for dematerialisation. The investor should note that he can convert physical form of securities into book entry form in NSDL depository system only if the company which has issued the securities has entered into an agreement with NSDL to offer demat facility.
Is it necessary to have a depository account in case I apply for shares in Rights Issue/IPO?
It is not necessary to have a depository account for applying shares through Rights Issue/IPO. The investor can apply shares in physical form also, however for your convenience and in order to eliminate the risks to investors on account of fake/forged certificates, bad deliveries, delays in transfer etc., settlement of all trades in securities of company making an IPO has to be in demat form only.
Can I hold other securities in same demat account?
Yes you can have same demat account for the purpose of holding other securities such as government securities, mutual funds etc.