One of the Demat users recently contacted me. She wanted to enquire about an email that she received in her mail box.
The email read as below:
As you can easily make out from the message sent by the Demat service provider that the Demat account has been de-activated!
This could be a matter of curiosity for those who are not in the habit of using their Demat accounts often. Those who do would never receive it. So, let us learn about the Dormancy status on a demat account and how we can get rid of this.
What is a Dormant account?
A dormant Demat account means that the demat account has not been in use for a long time. As per the Stock Exchange guidelines or more to say that the regulator, SEBI’s guidelines,
“If a Demat account remains inactive for a time period of 2 years, then the account has to be marked as a Dormant account”
what happens if a Demat account is marked as Dormant
Dormancy is a kind of freeze on the account. Once a Demat account is declared as dormant, you can not trade on it. You won’t be able to buy or sell shares. In fact, you will not be able to do any kind of transaction on the Demat account.
You will not be able to update your contact details. You won’t be able to transfer the funds into your Demat account for trading and investing.
You may also call it a temporary hold on the Demat account.
Why the Demat Account turns Dormant?
An account may turn dormant despite a trader being highly active. In most of the cases, those who are trading open multiple Demat accounts. But they don’t use all of them. And that’s how it is. We prefer and develop a liking for a particular broker for their brokerage structure or for the kind of interface that they provide.
The case could be that we wanted to simply stop trading on the platform for some time. And then we forgot to close it down altogether.
Whatever may be the reason, but it leads to inactive and unnecessary hassles.
Does a Dormant Account means the Demat is closed now?
No. Not at all! Your Dormant account is not a closed account. It is just a deactivated account. It’s like the engine of a car has been suspended from functioning temporarily.
So, what do we do to activate the account?
So, if you wish to keep the Demat account, you may do so. You need to provide your KYC to the broker. KYC is a simple act of providing your proofs of Identity and address. You may be required to furnish them with an application form duly signed by you.
The form will be available on the broker’s site. You may download it. Else you may also check out for the eKYC option if they do provide! eKYC is about getting the verification done online.
or Else!
Nothing major will happen to you. Your broker won’t penalize you. But, it may just remain in their records in your name. And when you would need, you may not be able to trade!
So, either you keep it active or simply close it down.
