How Can You Activate A Demat Account? Complete Process

An active Demat account always offers investors access to many investing opportunities. However, an inactive Demat account always necessitates the need to activate it again for trading in the stock market. If you want to start trading again, you must know how you can activate a Demat account.

The process of activating a Demat account follows simple steps. The process also involves completing the KYC or settling any pending dues (if there are any).

What is a Dormant Demat Account?

A dormant Demat account refers to a Demat account that hasn't been utilized in a while. This account has been dormant or inactive, or the investor has not made any transactions. The account is deemed inactive if no trading transactions have been taken for a continuous 12-month period. 

An account is considered inactive if no trades have been made on any exchange in the last 12 months. Even if the account hasn't registered any trading transactions, the Demat account is still operational and needs activation.

Why Do Dormant Demat Accounts Turn Inactive?

There are many reasons why a Demat account is designated as inactive, which includes:

Fraud Prevention: Designating a Demat account as dormant help prevents fraud. It serves as a deterrent to scammers who try to take advantage of inactive debts for dishonorable intent.
Raising Awareness: Brokers and financial institutions become aware of inactive accounts on identification. They can compare the frequency of these types of accounts because of this increased attention.
Safeguarding Account Holders: Financial organizations show their dedication to consumer security and safety by locating and resolving inactive accounts. This gives account holders peace of mind that the necessary safeguards are in place to protect their money and data.

Disadvantages of a Dormant Demat Account?

Some drawbacks of an inactive Demat account include:

Annual Maintenance Charges: Even when it is not in use, yearly maintenance costs can apply.
Risks: It might be open to fraud or misuse by scammers who could get access to account information, alter it, or sell the investor's shares without their knowledge.
Missing out on the Stock Market Potential: It can miss out on stock market advantages and opportunities, such as price appreciation, business activities, dividends, and so on.

How to Activate a Demat Account?

Activating a Demat account follows a set and simple process that investors must adhere to. Here is a step-by-step process of how to activate a dormant Demat account:

Step 1: Contact the broker or the depository participant (DP) who initiated the account to make a reactivation request.
Step 2: Complete a reactivation form and send in the necessary paperwork, including your PAN card, proof of address, proof of identification, bank account information, etc. 
Step 3: Fill out the KYC forms and sign a contract with the broker or the DP.
Step 4: Pay off any outstanding debts or negative account balances.
Step 5: Obtain confirmation that the broker or the DP has reinstated the account.
Step 6: Reactivation fees may or may not be required, and the procedure might take seven to ten business days. Depending on the trading volume or account balance, the charge may be waived or lowered in accordance with the broker's or DP's policies.

How to Reactivate a Dormant Demat Account?

Follow this step-by-step process to reactivate your dormant Demat account:

Understand Your Time Limit: Brokerage firms frequently label a Demat account as dormant when it hasn't been used for a predetermined amount of time. Check the particular time restriction imposed by your broker or Depository Participant (DP) to see if your account is truly inactive.
Reactivate Your Demat Account: Get a reactivation form from your broker or DP to make the official request for reactivation. You will also need to submit documentation verification with the reactivation form. These can be passports, PAN cards, or other identity credentials that your DP specifies.
Pay Off All Debts: Prior to having your inactive Demat account activated, make sure you've paid off all outstanding fees or maintenance obligations.
Reactivation Fees: Reactivation fees, usually of around ₹500, are levied by certain DPs. It's crucial to remember, though, that if the total value of the shares kept in your inactive account is high, this cost could be eliminated.
Keep Your Demat Account Active: Check the status of your account and your equities by logging into your Demat account at least once every six months.

Conclusion

Anyone wishing to start investing and trading in the stock market in India must activate a dormant or inactive Demat account. Knowing the procedure and carefully carrying out the required procedures can guarantee a smooth and effective activation experience. Once activated, you can confidently and easily start investing again.