Investors in India usually need to have a Demat account to hold securities in electronic form before investing in shares, bonds or other market linked products here. With a Demat account, the investments are stored and transferred in market transactions.
Investors can avail of different types of Demat accounts depending on their residency status, portfolio size, and investment needs. Knowing the types of demat account helps people to select a structure that fits their financial needs.
Types of Demat Accounts in India
In India Demat Accounts are categorised into 4 types. Standard Demat Account, Basic Services Demat Account, Repatrial Demat Account for NRIs remitting funds abroad. Non-Repatriable Demat (NRO) for NRIs to manage earnings from India.
The table below explains the major types of Demat accounts available in India and their primary usage.
| Particulars | Regular Demat Account | Basic Services Demat Account (BSDA) | Repatriable Demat Account (NRE Demat Account) | Non-Repatriable Demat Account (NRO Demat Account) |
|---|---|---|---|---|
| Suitable For | Resident Indian investors | Investors with smaller portfolios | NRIs investing with repatriation facility | NRIs managing income earned in India |
| Key Features | Used for holding shares, ETFs, bonds, mutual funds, and other securities in electronic form | Lower AMC structure for eligible holdings | Permits eligible fund repatriation subject to RBI/FEMA regulations | Used for investments funded through Indian income sources |
| Linked Bank Account | Standard Savings/Current Account | Standard Savings Account | NRE Account | NRO Account |
1. Regular Demat Account
A Regular Demat Account is available for resident Indian investors and is the most common type of Demat Account used to hold securities like shares, mutual funds, ETFs, and bonds in electronic form.
A registered Depository Participant (DP) can open the account. The annual maintenance charges (AMC) and service fees can vary depending on the broker and the account features selected by the investor.
Key Features of a Regular Demat Account
| Particulars | Regular Demat Account |
|---|---|
| Eligibility | Resident Indian investors |
| Investment Options | Shares, ETFs, bonds, mutual funds, debentures |
| Account Maintenance | AMC applicable as per broker policy |
| Usage | Electronic holding and transfer of securities |
2. Basic Services Demat Account (BSDA)
A Basic Services Demat Account (BSDA) is for investors with smaller portfolios. SEBI had introduced the category to help reduce maintenance costs for eligible account holders.
Key Features of BSDA
| Particulars | Basic Services Demat Account (BSDA) |
|---|---|
| Eligibility | Investors with smaller holdings |
| AMC Benefit | Zero AMC for holdings below ₹50,000 |
| Reduced AMC | Applicable for holdings between ₹50,000 and ₹2 lakh |
| Purpose | Lower-cost Demat account structure |
Eligibility conditions and charges may vary depending on the Depository Participant.
3. Repatriable Demat Account (NRE Demat Account)
Repatriable Demat Account It is intended for Non-Resident Indians (NRIs) who want to invest in Indian securities through the funds lying in an NRE bank account. The repatriation of eligible funds and proceeds of investments outside India are subject to applicable RBI, FEMA and banking regulations. For current repatriation rules and limits investors should check with their bank or financial adviser.
Key Features of Repatriable Demat Account
| Particulars | Repatriable Demat Account (NRE Demat Account) |
|---|---|
| Suitable For | NRIs |
| Linked Account | NRE Bank Account |
| Fund Repatriation | Permitted subject to regulations |
| Investment Source | Foreign earnings remitted to India |
4. Non-Repatriable Demat Account (NRO Demat Account)
NRO Demat Account is used by NRIs primarily for investments made from income received in India such as rent, pension and dividends. This account is connected to an NRO bank account. Funds from such accounts will be repatriated subject to applicable RBI and FEMA regulations.
Key Features of Non-Repatriable Demat Account
| Particulars | Non-Repatriable Demat Account (NRO Demat Account) |
|---|---|
| Suitable For | NRIs earning income in India |
| Linked Account | NRO Bank Account |
| Investment Source | Income generated within India |
| Repatriation | Subject to RBI and FEMA rules |
Things to Consider Before Choosing a Demat Account
The choice of a Demat account depends on your investment needs, residential status and the way you would like to operate. Factors investors may want to consider before opening an account are:
Check Your Residential Status
Resident investors can opt for a Regular Demat Account or a BSDA, depending on their eligibility and investment needs. NRIs are generally asked to open either an NRE or NRO Demat account depending on the source of funds and repatriation preferences.
Understand Your Investment Requirements
The products and services that a broker offers can differ from broker to broker. If you are an investor who plans to hold securities like bonds, ETFs or unlisted shares, you shall check the product availability, charges and operational process offered by the Depository Participant before opening an account.
Review Portfolio Size
Investors who aim to hold smaller portfolios may determine if a BSDA structure is suitable, considering the prevailing eligibility criteria. If holdings are over prescribed limits the account may be moved to a standard fee structure as per DP policies.
Evaluate Banking Requirements
For NRIs, linkage of the right bank account is important. NRE accounts are generally used with repatriable Demat accounts and NRO accounts are linked with non-repatriable account structures.
Comparison of Different Types of Demat Accounts
| Particulars | Regular Demat Account | Basic Services Demat Account (BSDA) | Repatriable Demat Account | Non-Repatriable Demat Account |
|---|---|---|---|---|
| Investor Type | Resident Indians | Resident Indians | NRIs | NRIs |
| AMC Structure | Standard AMC | Reduced AMC for eligible holdings | Depends on the Depository Participant (DP) | Depends on the Depository Participant (DP) |
| Repatriation Facility | Not Applicable | Not Applicable | Allowed subject to applicable regulations | Restricted as per applicable regulations |
| Linked Bank Account | Resident Savings Account | Resident Savings Account | NRE Account | NRO Account |
| Suitable Portfolio Size | Medium to Large | Small Portfolios | International fund movement | Indian income management |
Conclusion
Being aware of the different types of Demat accounts, investors can decide which account structure is most suitable for their residency status, investment activity and banking needs.
Investors should read the applicable charges, operational features and the regulatory requirements issued by SEBI, RBI and the respective Depository Participant before opening an account.
FAQs on Different Types of Demat Accounts
What is the difference between NRE and NRO Demat accounts?
An NRE Demat account permits NRIs to invest using funds held in an NRE account with repatriation allowed as per applicable regulations. NRO Demat Account is mainly used to hold investments that are funded from the income earned in India.
Can an NRI open a regular Demat account in India?
No. As per the applicable RBI and FEMA guidelines, NRIs have to open an NRE or NRO Demat account.
How many Demat accounts can I open in India?
One can have as many Demat accounts as one want. Each account may have separate maintenance charges and compliance requirements.
What documents are required to open a Demat account?
The documents commonly required for opening a Demat account include:
| Particulars | Details |
|---|---|
| PAN Card | Identity and tax verification |
| Aadhaar Card/Identity Proof | KYC verification |
| Address Proof | Residential verification |
| Bank Account Proof | Account linkage |
| Passport/Visa (for NRIs) | NRI status verification |
Document requirements may vary depending on the Depository Participant and investor category.
Is BSDA suitable for all investors?
A BSDA is suitable for investors with relatively smaller portfolios and seeking lower maintenance costs. Investors should check the eligibility criteria, charges and features of the account before opting for such accounts.
What are the charges for different types of Demat accounts?
Charges for Demat accounts vary depending on the Depository Participant, account category, and services offered. These charges may include:
- Annual Maintenance Charges (AMC)
- Transaction charges
- Custodian fees
- Account modification charges
- Debit transaction fees
Investors should review the broker’s latest fee schedule before opening an account.
Can I convert my regular Demat account into a BSDA?
Yes. Eligible investors can request their Depository Participant to convert an existing Regular Demat Account into a BSDA, subject to applicable conditions.
Is there any minimum balance requirement in a Demat account?
No, there is usually no mandatory minimum balance requirement for maintaining a Demat account in India. Account maintenance charges may be applicable as applicable.
Do mutual fund investors need a Demat account?
Investments in mutual funds are either in Demat form or through a Statement of Account (SOA) given by the fund house. The format is a function of investor preference and the need to manage investments.
Disclaimer
The information contained in this article is for general informational purposes only and is not intended to be, nor should it be construed as, financial, legal, tax or investment advice. Investors are advised to refer to the latest SEBI, RBI, FEMA and Depository Participant’s guidelines before opening and operating a Demat account. Features, charges and eligibility criteria may vary between brokers and financial institutions.
