Importance of Monitoring Dormant Demat Accounts

A Demat account may become dormant after a long period of inactivity. This could be because the investor has not made any transactions or checked in on the account for an extended duration. Monitoring dormant Demat accounts is crucial to prevent unauthorised access and misuse.

 

The Depository Participant (DP) may send a notice to the investor with directions on how to reactivate their account. Until the process is completed, the dormant account remains vulnerable to fraudulent activities. Keep in mind that a dormant Demat account is different from one that has been closed since it cannot be reactivated. 

Here’s why monitoring your dormant Demat account at regular intervals is essential:

• Fraudulent Activities

Dormant Demat accounts have a higher risk of fraudulent activities due to the unawareness of the holders. Fraudsters take advantage of this situation and use your account to transact without your permission. This may cause financial setbacks, which could have been avoided with checks at regular intervals.

• Fees and Charges

You may remain uninformed about the charges associated with your account, including the Account Maintenance Charge (AMC). Not paying the AMC on time will eventually result in the Demat account being categorised as dormant. The broker may send notifications to remind you of these unpaid charges. You may also have to pay a reactivation fee. 

• Depreciating Assets

Assets in your dormant Demat account may include securities that may have depreciated. In case you fail to convert these assets into cash at the right time, you may see a fall in their value. 

• Unclaimed Dividends and Benefits

As per the Companies Act, 2013, shares and dividends will be transferred to the Investor Education and Protect Fund (IEPF) if they remain unpaid or unclaimed for over seven years (consecutively). Hence, you must routinely monitor your Demat account to prevent such losses. Though, the securities transferred to IEPF will be returned if you complete certain formalities. 

Here are some ways to identify whether your Demat account has become dormant: 

• Intimation from DP

DPs usually reach out to investors before or after the Demat account becomes dormant. This may be done in the form of SMS, emails, or mail. 

• Regularly Check Account Statements 

These statements contain details of all your transactions and holdings. If there hasn't been any activity for a few months, then your Demat account may have become dormant. 

• Account Portal 

Log into your Demat account through the broker's online portal. You can check the account's status and review your transaction history to check for inactivity. 

Here are the steps that you may have to follow to reactivate a dormant account:

1. Check with your DP whether your account has been classified dormant

2. Get a reactivation form and provide the necessary documents

3. Clear any outstanding dues and complete the reactivation process

4. Maintain the activity in your Demat account by logging in at least every 6 months and monitoring its status

 

Note: The actual steps may vary across DPs.