The process of investing in India’s securities market is well-defined and highly transparent. In order to start your foray into market-linked investment, you need to open a demat account and a trading account.
While a demat account serves as a safe storage space for your assets purchased from the securities market, a trading account serves as the conduit between you and stock exchanges.
In this article, we shall discuss what causes a demat account to be marked dormant. We shall also delve into the process to re-activate a dormant demat account.
Why Your Demat Account can Become Dormant
In order to keep your demat account functional and active for future trades, you must use the linked trading account to buy or sell securities to/ from the market at least once in a year. Failure to do so shall make your account vulnerable to be classified as a dormant account.
According to a circular issued by the National Stock Exchange (NSE) on June 30, 2023, a trading account that has seen no activity for 12 months shall be categorised as a dormant account.
If you do not utilise your trading account to place any buy/ sell order in the market for a period exceeding 12 months, the trading account and the linked demat account shall be marked as inactive and dormant by the stock broker/ depository participant.
It is worth noting here that no further trades can be carried out through a dormant trading account and demat account. You shall, therefore, be required to re-activate your account to be able to use it again.
Steps to Reactivate a Dormant Demat Account
The process to re-activate a demat account that has been marked as dormant depends upon the duration for which the account has stayed inactive.
- If Your Demat Account Has Been Dormant For A Period Between 12 And 24 Months
Let us say you open a demat account on January 5, 2024 and do not use it to make any trades for a period exceeding 12 months. Subsequently, your demat account gets marked as dormant on, say, February 1, 2024. If you re-activate said demat account within 24 months (counted from the date of the last trade), you need to follow the steps mentioned below.
- Contact your depository participant (DP).
- Request the initiation of the demat account reactivation process – via email or filling a form (as applicable).
- Complete the formalities of reactivating your demat account.
- Await the confirmation of demat account reactivation from your DP.
- Check your demat account and the linked trading account.
- If Your Demat Account Has Remained Dormant For More Than 24 Months
Should your demat account stay dormant for a period exceeding 24 months (since the date of the last trade), you must initiate Re-KYC for the account. In order to do so, follow the steps mentioned below:
- Reach out to your depository participant.
- Request the reactivation of your demat account.
- Complete the Know Your Customer (KYC) process, including In-person Verification (IPV). You will be required to submit a valid proof of identity, valid PAN card, valid proof of address, and latest passport size photographs.
- Wait for your DP to re-activate your dormant demat account.
To Sum It Up
In order to prevent your demat account from being classified as dormant, you must trade through the linked trading account at least once a year.
If you are not expecting to trade for an extended time period, you can opt to temporarily freeze your demat account.
Once your demat account has been marked dormant, however, you must follow the due process of account reactivation to utilise it again.
