Demat account opening is as simple as opening a savings account in a bank. A demat account is actually a dematerialized account that holds dematerialized stocks, just like your saving bank account holds your savings. An account has to be opened with a depository participant (DP). All the banks and brokers that offer depository services are DPs, but all the DPs are not banks or brokers.
There is a certain amount that is supposed to be maintained in the bank savings account in order to continue availing the bank’s services. But in the case of demat account, there are mainly four charges that are levied on it. The four charges are Account opening fee, annual maintenance fee, transaction fee and custodian fee. All these charges are different for every DP.
Account opening fee: This is supposed to be paid only during opening the demat account. Charging opening fee from the customer is not compulsory and hence the DP may or may not charge it. However, some stock trading brokers and banks may levy a nominal charge for the stamp papers that would be required by you for executing the contract with your DP.
Annual maintenance fee: Annual maintenance charges are also referred to as folio maintenance fee, which is generally charged in advance.
Brokerage/Transaction fee: Brokerage or transaction fee is levied for the debiting and/or crediting of shares from and to the account every month. Some of the DPs levy a fixed amount as fee for every transaction, while other few calculate their fee on the basis of the total value of the transaction. Other than that, some of the DPs offer frequent trader accounts where the active traders are charged with lower fees as compares to the charges levied by them on the non-frequent traders. The charges also vary on the basis of the type of transaction being carried out, ie selling or buying. In other cases, few DPs levy the fess only on debiting of shares, while some others might levy the fee for both. The charges are also levied if the instruction given by you for buying or selling is rejected or fails.
Custodian fee: This is charged on a monthly basis and is calculated on the basis of the number of shares your demat account holds. The fee is charged somewhere between INR0.5 to INR1 per share per month. DPs do not levy custodian fee for ISIN on which one-time charges have been paid by the companies to the DP.
Find out more information at the Best Demat Account in India website.