A Demat Account is a type of account that is used for the sake of holding securities and shares. For the maintenance of such Demat accounts, a particular amount is charged which is called Account Maintenance Charge (AMC). Not paying AMC charges on time might lead to certain negative effects on your account. Which is something none of us want right? Let's dive into the concept of AMC and its maintenance process.
- Demat Account:
Dematerialized account or online Demat Accountavails facilities of holding securities and shares electronically. While trading online, shares are purchased and held in your Demat account, which facilitates easy trading for all the users. Your account holds all your investments that you make in government securities, shares, bonds, exchange-traded funds, mutual funds, and bonds in a single place. To maintain this account you must pay AMC, otherwise, it will be considered as a dormant Demat account or inactive account.
- What Are the Consequences of Not Paying AMC Charges for Your Demat Account?
Not paying AMC charges is one of the reasons for dormant account and it has several consequences that you must be aware of. They are as follows:
- You will receive tons of reminders via SMS, phone calls, and Email from your broker.
- After some time your account of Demat will be considered as a dormant Demat account (an inactive account). That means that you won't be able to do any transactions from this account until you reactivate it once again.
- For the reactivation process, you need to pay the charges for reactivation and you also have to pay for the dues that were previously pending (AMC + interest). The amount of reactivation fee is approximately Rs. 500.
- If you choose to close your dormant Demat account, you have to reactivate it and then close your account permanently.
- If there are no holdings and still you have an inactive account, then you are not allowed to open another account.
- Your brokers (DP or depository participants) hold your dormant account until you deactivate it. They will bombard you with the statement of Demat account and remainders.
- The Bottom Line:
If you're dealing with a Demat account, it is crucial to know the basics of AMC as it might be one of the reasons for dormant account. It will also save you from paying a heavy penalty, something we'd definitely like to avoid! Furthermore, remember that the time to consider any account dormant, the interest rate, reactivation fee, and so on depends on the broker you choose. Therefore, while taking any decision dealing with your account, you can either make quick research about it or consult with your broker.
Related Articles: How to Open a Demat Account Without a Broker | Factors to Keep in Mind While Opening a Demat account | Factors to Consider When Opening a Demat Account
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