If an Investor already has a Demat and Trading Account with a leading stockbroker, can he open another Demat Account? Well, the answer is in favour of the Investor. Like a person can hold multiple bank accounts in different banks, an Investor can certainly have right to open Demat Account with different brokers.
Is it legal to have Multiple Demat Accounts in India? Well, your PAN Card is linked to your Demat Account. Since a person cannot have multiple PAN Cards, and all your Demat Accounts will be connected with your PAN card, the Equities bought by a person will be mentioned as his property only. Thus, an investor can legally open multiple Demat Accounts in India. However, you have to open Multiple Demat Accounts with different brokers every time.
Advantages and Disadvantages of Multiple Demat Account
Though a person can hold Multiple Demat Accounts, there are certain advantages and disadvantages of the same. These are discussed below:
Advantages of Multiple Demat Account
User Friendly Interfaces: The first advantage of having multiple accounts is that you can use different interfaces offered by different brokers. This will enhance your user experience and help you understand the best of the lot.
Segregation of Traders: Another advantage of having multiple Demat Accounts is that you can use each account to segregate your traders, for example, you can use one of your accounts for long term investments, another one you can use for short/frequent trading. Thus, reducing your confusion and keeping a track of your investments.
Disadvantages of Multiple Demat Account
Multiple Maintenance Charges: If you have one Demat Account, you have to pay Annual Maintenance Charges (AMC) for only one account. But when you have multiple Demat Accounts, whether you use all of them or not, you have to pay the AMC of all your Demat Accounts. The amount of maintenance charges might vary from one broker to another, but you have to pay.
Keeping Track of the Stocks: If you have multiple accounts, it can create a lot of confusion. Suppose, if you have ten stocks in one Demat account and five in another account, then chances are there you lose track of the stocks. Sometimes you might completely forget about a stock, which might be in a Demat Account that you hardly “login”. Moreover, it is not easy to remember the dates to pay your account charges and keep a track of transactions on your accounts.
Freezing Account: If you are not using your account for a long time, ignoring the multiple notifications and multiple alerts from your broker, then chances are there that your Demat Account can be frozen. Though you can recover your shares as they are safe with NSDL or CSDL, it is advisable to use your account at least periodically. Also, when you do not pay much attention to your accounts, the charges and fines keep accumulating. This can become quite a burden in future.
So now that you are well aware of the advantages and disadvantages, you must reconsider before opening Multiple Demat Accounts.