How to select a Depositary Participant for a Demat Account?

Thanks to technology, physical shares are now a thing of the past. In 1996, the SEBI introduced dematerialised accounts to eliminate the risk of theft and forgery of physical shares. With a Demat Account, you can hold your shares electronically.

Demat Accounts are held in either of the depositories: the National Securities Depository Limited or the Central Depository Securities Limited. However, depositary participants (DP) are the entities that facilitate Demat Accounts to users. To know on how open a Demat Account that suits you, keep reading further.

Factors to consider

Given that SEBI has over 500 DPs, choosing a Demat Account can be tedious. Remember the following things when selecting a DP:

  1. DP’s Reputation

Selecting a DP with years of good market reputation is always a safer choice. That said, you can find newer companies that offer innovative investment solutions. You can always scan the internet for customer reviews. If the DP has a social media account, you can sometimes find complaints in the comments section posted by users. You can ask questions about the DP on discussion forums as well.

  1. Account-opening options

Many DPs, especially bank subsidiaries, offer combination accounts. For instance, a 3-in-1 account typically offers a Trading, Demat, and Savings Account. Also check for DPs that offer Basic Services Demat Account. These are no-frill Demat Accounts mandated by SEBI. They are ideal for small investors who seldom invest in stocks.

  1. Account Costs

Demat Accounts come with several charges. DPs typically charge a one-time account opening fee, annual maintenance charges and brokerage fees. For high-value investments, a low-brokerage Demat Account would be ideal. You may have to pay charges when you sell shares as the DP has to pay those charges to the depositories.

Additionally, DPs also charge for services such as dematerialisation and rematerialisation of shares, destatementisation and restatementisation of Mutual Fund units, redemption, physical or duplicate statements, etc. To stay ahead of the competition, DPs may waive-off various charges. You can find these charges on the respective DPs’ websites.

  1. Account access options

Today, you can manage your Demat Account yourself. Check whether your selected DP offers a website. If you are keen on trading stocks, opt for a DP that offers both Trading and Demat Accounts under a single log-in. A Trading-Demat Account option allows you to buy, sell and hold stocks with ease. Plus, many DPs also provide mobile applications. Hence, it would be best to shortlist DPs that are technologically equipped.

  1. Customer service

One of the important factors before you open a Demat Account is the DP’s customer support interface. Transactions may fail, there could be discrepancies in shares sold, and so on. While such problems are quite common, the DP’s customer service facility must be equipped with all the necessary resources to resolve them. Customer reviews on the internet usually disclose information about poor customer support.

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