Shares are kept in the dematerialized or electronic form in two depositories – National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL). Depositories receive shares through Depository Participants (DP) and not directly from investors. DPs are registered with the Securities Exchange Board of India (SEBI) and acts as agents for depositories. To trade in shares, you need to have two accounts – a trading account with a share broker and a demat account with a DP.
Investors are free to change their DP if they are not satisfied with the service provided by the DP, or the DP is not prompt with settlement of shares bought or sold or the charges are high, or for any other reason whatsoever. To close a Depository Account, application has to be submitted in the prescribed format, which can be taken from the DP. NSDL has prescribed closure request format vide Annexure Q of the NSDL business rules.
Closure request can also be given in a plain paper provided it contains all the required details and the following is ensured:
- The Client must submit duly signed delivery instruction form(s) (Annexure L) for transferring the securities, if any.
- The request letter must contain all details that are specified in the Application for Closing an Account (Annexure Q).
- All the account holder(s) must sign the request.
Important Points to Note
- All unused Transfer Instruction For Delivery (TIFD) slips has to be submitted along with the closure request.
- A demat account can be closed only if there are no securities in it. In case you are holding any shares in the demat account, same has to be first transferred to your new demat account with the new DP, which has to be mentioned in the closure request form.
- SEBI has vide circular No. MRD/DoP/Dep/Cir-22/05 dated November 09, 2005 advised that with effect from January 09, 2006, no charges shall be levied by a depository on DP and consequently, by a DP on a Beneficiary Owner (BO) when a BO transfers all the securities lying in his account to another branch of the same DP or to another DP of the same depository or another depository, provided the BO Account/s at transferee DP and at transferor DP are one and the same, i.e. identical in all respects.
- In case the BO Account at transferor DP is a joint account, the BO account at transferee DP should also be a joint account in the same sequence of ownership.
- Transfer charges will be waived if accounts of transferee DP and transferor DP are the same, i.e., identical in all respects. To avail of the waiver, a Client Master List (CML) for the target account needs to be submitted along with the closure form.
- All other transfer of securities consequent to closure of account, not fulfilling the above-stated criteria, would be treated like any other transaction and charged as per the schedule of charges agreed upon between the BO and the DP.