Where to open a demat account….
So many people ask me this question that I can reply without much thought…..
Well to start with,
1. Do not open with a broker: I know how a broker used client A’s share to do a pay in for client B. It is a matter of relief that the shares were replaced next week, but this is FRAUD.
2. A bank has no advantage in fiddling with your shareholding at all, so chances are they will not fool around with your shares.
3. Whoever you open with please keep checking your statement.
4. If you are not going to buy or sell shares for say 4 months, request the service provider to freeze your account.
5. Most brokers will want you to open an account with them. In such a case open one account in a bank where you will keep your big long term holdings and one with the broker for trading.
6. A big reputed broker or a small not very reputed broker behave the same way under stress. Repeat.
7. Look at the costs too. My account is with a bank, and I think I am paying very high charges, but will live with that I think – resistance to change and afraid of needing to sign in 43 places.
8. Stock Holding is the only non bank non broker to give this service – and is not a bad choice at all. Has reasonable checks and balances and will be more careful than a broker.
Ranga
Good article, thanks for posting.
Please clarify:
1. Is a person permitted to hold multiple demat accounts for shares ?
2. If Demat account is with bank, how to link it with broker account, for buying/selling transactions? Is it possible ?
3. Many of us open ‘one account’ with a brokerage (Sharekhan,Religare etc). What are the sub-components of that? Which of those can be held at different places ?
Paul
A typical broker has RSA keys provided with the account. You cant sell or buy(even your RM can`t) without the key.
This is may not be applicable in case of risk management / if you owe them money.
kedar
Stock Holding corporation is being taken over by idbi bank so that option also not remain now
Sri
I’m a little(?) confused. How is a broker defined here? Are ICICI direct, sharekhan, etc. termed as brokers? What should I do to make sure that my shares are not controlled by broker?
Uma Shankar Ladha
There is a misinformation here. The point 1 can happen only, if you give a PoA (Power of attorney) to your broker (bank/sharekhan etc.) All these entities will ask you to sign a PoA if you do online trading with them. They need these PoA to deliver shares to exchange when you trade.
Point 1 do happen, but if you are concerned about it, then dont have an online account. Have a offline account, where in NDSL/CDSL (where bank/broker opens demat account in your name on your behalf) gives you a delivery book (its like a cheque book). So whenever you do a trade, you need to fill this, sign it and give it your broker/bank. Broker/bank forwards this delivery slip to the exchange and they take care of settlement.
I hope this clears the confusion with point 1.
For point 6, always go with reputed brokers. They have a lot to loose than the non-reputed brokers. And most of the time, point 1 is not done by the broker, but by the dealer.
Rahul
Hi Subra sir,
is fundsindia.com a good stock brocker, They are charging only 30ps for 100. Please help me if I can start investing through fundsinda.com in stock market.
Yours faithful reader,
Rahul
Nitin
Sir
I have a demat account with Bajaj and HDFC
I only use HDFC
Just for the pain of not closing (since they ask you to come to their office etc etc), I haven’t closed it.
Is it fine? I dont see any trades being done ….in that account
Prakash
Hi Subramoney, you have answered an important question, but I would appreciate if you could provide some guidance on the questions below:
(1) I have a PoA with a share broker, my cash account is with a PSU bank, and the demat account which I can view from PSU bank website is with NSDL.
(2) The broker as a company is big, however the individuals working there may take advantage, and so what controls and precuations should I take, for the following:
a) The broker has been given a blanket authority to deal upto a certain amount without contacting me, for buying and selling
b) My list of portfolio has been categorised into those for trading and those for long term investment purposes
c) How do I ensure that my broker does not use my idle shares in the demat account for securities lending or some other kind of activity (margin etc) without me knowing or without knowledge of NSDL or without knowledge of PSU bank
d) What control should I take to ensure that for all sales made, the money always gets transferred to my bank account and not with anybody else bank account
e) Is it possible for such things as “d” above to happen.
f) Same scenario in case of a buy transaction, how do I ensure that he debits my cash account and the shares brought gets transferred to another person demat account.
I would appreciate a response.
Thank You
Prakash