Demat account is the necessity for anyone who is looking to invest in the Indian financial market. Similar to this, there is a trading account. Both accounts are very important if it is to invest and hold shares and other securities for the long-term period. With a trading account, one can buy or sell shares, whereas a Demat account holds the shares in electronic form. Therefore, it is important to have a Demat account if you are planning to deal in the financial securities.
In simple words, we can say that a Demat account is not much different from a bank savings account. A Demat account is used to hold securities such as Equity Shares, IPO Shares, Bonds, Mutual Funds, Exchange-Traded Funds (ETFs), Government Bonds and so on while a bank savings account is used to hold cash.
Now, there has been a lot of confusion having multiple Demat accounts for use. Many investors are confused over whether they can open second Demat account or not. With this article, we aim to address the question that is penetrating the minds of many investors.
Can a Person Have Multiple Demat Accounts in India?
The simple answer is, yes! You are allowed to have multiple Demat accounts in India. In fact, you can have as many Demat accounts as wish. However, there is a limit of only one Demat account with a broker or Depository Participant (DP). It means, if you have already opened a Demat account with some broker, you cannot open another account with the same broker. Some investors or traders give preference to multiple Demat accounts to capitalize on the facilities provided by different brokers or to separate their long-term investments from short-term trades.
Investors who trade in multiple securities such as equity shares, gold and F&Os use different Demat accounts to separate their investments. In short, keeping multiple Demat accounts help in segregating the investment and trading portfolio. However, using more than one account would cost you higher in the form of annual maintenance charge (AMC) which will be separate for different Demat accounts. And this amount will vary from broker to broker.
In addition, it would be recommendable to avoid using multiple accounts if you are a seasonal investor. Having an account unused for long-duration might lead to the possibility of being frozen. Although your shares will be safely held with the depository.
Therefore, legally, one is allowed to use multiple Demat accounts but one should also be prepared for certain complications like extra AMCs, separate DPs, and account being frozen during inactivity. If you are a seasonal investor or trader, you should avoid using multiple accounts, as it would lead to complications. However, if you are a professional who is looking to separate his/her investments and trades, and would like to benefit from different facilities by different brokers then you can use multiple accounts to do so. It all depends on your needs.