After we have deposited a cheque in our bank account, we typically ascertain the bank’s account statement so we can be sure that the funds have been credited into our account. However, it isn’t that often that traders check their Demat account’s statement. The goal of doing so would be to learn if the purchased securities have been credited into our Demat account. However, it’s important to check your Demat account status regularly. Keep reading to find out why.
How Are Shares Kept?
All securities that are traded in India are kept in electronic or dematerialized form in one of two depositories — Central Depository Services Limited (CDSL) and National Securities Depository Limited (NSDL). These depositories serve as a kind of reservoir of shares. Their goal is simply to store your shares. NSDL and CDSL receive your shares via your brokerage or depository participant (DP), and not directly from investors themselves.
Why You Should Check Your Demat Account Status
Post settlement and pay-out, it is vital to make sure that your purchase shares have been transferred by your broker into your Demat account from the common pool account. Typically it is assumed that the shared would transfer automatically once the payment is carried forward. While in most cases, this may be true. However, in certain cases, it is just as likely that the shares which have been purchased have not been transferred into one’s Demat account. Instead, they may be kept in the common pool account for longer than necessary by the broker as a margin requirement for other clients.
This can be compared to a bank account not choosing to credit the cheque’s amount to your account. Instead, the bank is choosing to keep the amount that belongs to you to themselves in their own account. What are the implications of not having the shares you have recently purchased in your Demat account? The first is unnecessary exposure to multiple risks. It’s possible that your shares are being utilized by your broker for a delivery obligation they have toward another client, and you may not even know of this.
Hence, the risk posed by this is that your broker may be lending your shares to a third party without your knowledge. Additionally, your broker could be using your shares for their margin requirements with a certain exchange. In this case, you are exposed to the risk of your shares being sold by that same exchange in case of extreme market falls. The worst-case scenario is that in this event, the broker may not be able to furnish any additional margin to that exchange in time.
A final implication of not taking the time to check demat account status is that you will likely not receive any corporate action benefits such as dividends and the like from the shares you have bought that have not yet been transferred to your account. Your broker will receive these benefits in your place. Hence, it is crucial to ensure that the shares you purchase are quickly transferred from the common pool account into your own Demat account by your brokerage.
How to Check Demat Account Status?
Since we understand why now let’s address the question of ‘how to check demat account status.’ Keep in mind that some depository participants send individual traders their account-holding statements regularly. This may be on a periodic basis, either monthly or quarterly. However, some DPs do not send their traders the account holding statement. So how do these traders check Demat account status?
In such cases, investors can opt for online access to their trading and demat account where they can view their holdings. Similar to bank account SMS alerts, Demat account SMS alerts can also be switched on. When any shares are automatically debited or credited, one will receive a message for the same. CSDL and NSDL both provide this SMS alert facility as well as online access to one’s Demat holdings.
Since its launch in 2004, NSDL — in particular — offers traders an ‘internet-based Demat account statement’, shortened to IDeAS. IDeAS can be used to view the transactions and balances in one’s Demat account with online updates and a maximum delay of thirty minutes. Clients and participants can register for IDeAS. However, those users who have opted for another one of NSDL’s e-services known as SPEED-e can also use IDeAS. With the aid of a Smart card, an account holder or clearing member will be able to access IDeAS.
