Can a Demat Account be Closed Automatically?

Are you into investing and trading? You probably know what a Demat account is. It’s an important tool used for managing shares in the stock market. But sometimes life can get busy, and we might forget about things we don’t use quite often. The same is possible for Demat accounts.

If you leave your trading account unused for a while, you might wonder will your Demat account closes automatically. But here’s the good news, your account cannot close automatically but can become inactive if left dormant. So, if you’re not using your Demat account anymore, it’s smart to close it permanently.

However, your account can become inactive or freeze either voluntarily or involuntarily. An involuntary freeze can occur if you leave your account inactive for over 3 years without any transactions. Here SEBI can instruct your depository participants (DPs) to freeze your account. It can also be imposed by statutory bodies like SEBI, RBI, or the Government of India due to failure to provide essential documents like Aadhar card.

Additionally, individuals can even go for voluntary freezing, which is useful when you’re travelling abroad for a longer period of time.

To unfreeze, the account holder needs to go through the KYC procedure all over again. If you don’t want to temporarily freeze your account but want to permanently close it, this blog can help you with it.

Below’s a quick step-by-step guide to help you understand how you can close your demat account.

Two types of Demat account closure

For closing a Demat account there are two ways you can do it –

1. Basic Account Closure

With this type of account, you can close your demat account only when you don’t have any shares, pending payments, or charges left with the depository. Here you can then directly ask your depository participant to close the account for you.

2. Transfer and Account Closure

If you still have shares or some pending charges/fees to be paid in your Demat account, you need to transfer the existing shares to another Demat account before closing your current one.

To move your remaining stocks to another Demat account, you need to fill out a delivery instruction slip (DIS). Make sure your details are the same on both accounts. Then, provide the client master report and submit your DIS with your final account closure form, either through courier or to your nearest DP.

Once that’s done, you can close your account without any restrictions.

A quick guide to close your Demat account

Here’s a quick Demat account closing guide-

Remember if you have an inactive or zero balance demat account, you cannot close it by just sending an email request to your DP. You’ll need to submit the request in person along with the physical copies of documents like Aadhar, PAN, licence, etc.

Before initiating the closing process, make sure there are no shares left in your Demat account, and you don’t even have plans to keep any. If your account has zero balance, and don’t wish to use it for investing, you still have to pay the charges to the DP. So, it’s ideal to get it closed down.

The next step is either downloading the Account Closure Form or taking a copy of it from the bank. Fill all the necessary details in it and sign the form. If more than one person is using the account, everyone has to sign the form in front of a Depository Participant (DP) official. This DP can either be a bank or a brokerage firm.

While sending in your closure form, make sure to include information like your ID and DP in your ID KYC info part.

You also need to state why you’re closing the account. You might want to close it by choice, or due to the prevalent situation like sudden death of the account holder or your unavailability to manage the Demat account.

The last step is to either courier it to the mentioned address by the brokerage firm/ bank or physically hand it over to the DP.

Closing a Demat will account typically take about 7 to 10 business days if all the documents are correct. It’s crucial to note that you don’t need to pay any additional charges to the depository when closing your account.

If you’re closing your current Demat account because of unwanted charges, you can consider switching to Dhan’s Demat account. We don’t charge a single penny for account opening or for its maintenance.

Conclusion

To conclude, a demat account is a digital way to manage shares in the stock market. While it doesn’t close automatically, it can become inactive if left unused. Closing your account saves money on maintenance fees. Switching to Dhan’s Demat account is a smart choice. It has no opening or maintenance charges, especially for investors looking to save some money.

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Happy Investing 💰

Disclaimer: This blog is not to be construed as investment advice. Trading and investing in the securities market carries risk. Please do your own due diligence or consult a trained financial professional before investing.