A Demat account is essential for holding shares, bonds, ETFs and other securities in electronic form. In India, Demat accounts operate under the regulatory framework of the Securities and Exchange Board of India (SEBI), while depositories such as NSDL and CDSL and their registered Depository Participants (DPs) provide the infrastructure and services.
SEBI has established various rules to protect investors, standardise account operations and improve transparency. Understanding these rules is important for anyone opening or using a Demat account.
What Is a Demat Account Under SEBI Rules?
A Demat account is an account used to hold securities electronically. SEBI’s investor guidance states that investors should open Demat accounts only with a SEBI-registered Depository Participant of a recognised depository.
The two principal depositories in India are:
- National Securities Depository Limited (NSDL)
- Central Depository Services (India) Limited (CDSL)
Banks, stockbrokers and other eligible entities can act as Depository Participants and provide Demat services to investors.
1. KYC Is Mandatory
One of the most important requirements for opening and maintaining a Demat account is Know Your Customer (KYC) compliance.
Investors are required to provide appropriate identification and other information requested during the account-opening process. SEBI’s investor charter advises investors to provide complete KYC documents and inform their DP whenever information linked to the Demat account changes.
Common information includes PAN, address, mobile number, email ID and bank details, depending on the applicable requirements.
2. No Minimum Balance Is Required
A Demat account does not require investors to maintain a minimum number or value of securities.
SEBI’s investor charter specifically states that there is no minimum balance requirement for a Demat account. It also states that investors have the right to open more than one Demat account in the same name, whether with one DP or multiple DPs.
However, individual DPs may charge applicable maintenance or service fees according to their disclosed tariff.
3. Demat Account Opening Charges
SEBI’s investor charter states that no charges are payable for opening a Demat account. However, investors should distinguish account opening from other services and charges that may apply after the account is opened.
For example, a DP may have applicable annual maintenance or transaction-related charges under its approved tariff.
Investors should therefore read the complete fee schedule before selecting a DP.
4. Nomination Rules
Nomination is an important feature of Demat accounts because it can make the transmission of securities easier after the investor’s death.
SEBI has introduced updated nomination norms for Demat accounts and mutual fund folios. In May 2026, SEBI further modified these norms to make nomination procedures easier for investors.
Investors can generally choose to provide nomination details or opt out through the prescribed process. The rules also provide greater flexibility regarding nominees and transmission of assets.
Therefore, investors should check with their DP and ensure that their nomination information is updated according to the latest applicable requirements.
5. Keep Mobile Number and Email Updated
SEBI encourages investors to keep the mobile number and email ID linked to their Demat account updated.
These details are important because transaction alerts and other account-related communications can be sent through electronic channels. Investors should inform their DP whenever there is a change in their contact information.
Keeping contact details updated can also help investors identify unauthorised transactions quickly.
6. Investors Must Check Their Statements
Investors should regularly check their Demat holdings and transaction statements.
SEBI’s investor charter advises investors to verify transactions carefully and report any unauthorised debit or credit to the DP or relevant depository.
Regular monitoring can help identify:
- Unauthorised share transfers
- Incorrect transactions
- Missing securities
- Unexpected debits
- Incorrect credits
If you find a discrepancy, contact your DP promptly and retain copies of relevant statements and communications.
7. Rules for Delivery Instruction Slips
A Delivery Instruction Slip (DIS) is used for certain securities transfers.
SEBI advises investors to accept the DIS booklet only from their DP and keep it safely. Investors should never sign or issue a blank or partially completed DIS. Details such as the ISIN and quantity of securities should be entered accurately.
This is an important security measure because an incorrectly completed or misused DIS can result in an unintended securities transfer.
8. Online Demat Security
Investors using online Demat and depository facilities must protect their login credentials.
SEBI specifically advises investors not to share their Demat or trading passwords, OTPs or login credentials for depository facilities with anyone.
Investors should also be cautious of messages or calls promising guaranteed returns or asking for sensitive information.
Never provide your OTP, password, PIN or other confidential credentials to an unknown person.
9. Power of Attorney Is Not Mandatory
SEBI’s investor charter states that a Power of Attorney (POA) is not mandatory for operating a Demat account through an intermediary.
If an investor chooses to provide a POA, they should carefully examine the powers being granted and understand their scope and implications. Investors also have the right to revoke an authorisation according to the applicable procedure.
Investors should therefore avoid signing documents without reading and understanding them.
10. BSDA Rules for Small Investors
SEBI has also provided the Basic Services Demat Account (BSDA) facility for eligible individual investors.
The purpose of BSDA is to make Demat services more affordable for investors with smaller holdings. According to SEBI’s investor charter, eligible accounts with securities holdings up to ₹50,000 have no AMC, while holdings between ₹50,001 and ₹2 lakh can attract AMC of up to ₹100. Different limits apply to debt securities.
Investors should check whether they meet the current eligibility conditions with their DP.
11. Rules for Transfer of Securities
Transfers of securities through a Demat account must follow the applicable depository procedures.
SEBI’s regulations require a DP to register transfers to or from a beneficial owner’s account based on instructions from the beneficial owner and provide confirmation according to the applicable depository rules.
This helps ensure that securities cannot simply be transferred from an investor’s account without the required authorisation.
12. Investor Grievance and Complaint Rights
If an investor has a problem with a Demat account, the first step is generally to approach the DP or depository through the prescribed grievance mechanism.
SEBI’s investor charter also states that investors have the right to approach the participant, depository or SEBI for resolution of grievances within prescribed timelines.
Investors can maintain records of their complaint, service request number and supporting documents for future reference.
Final Words
SEBI’s Demat account rules are designed to improve investor protection, transparency and security. Key requirements include completing KYC, using a SEBI-registered DP, keeping contact information updated, monitoring account statements, protecting login credentials and following the prescribed process for securities transfers.
Investors should also understand nomination rules, BSDA eligibility and applicable charges. Because SEBI regulations and operational procedures can change, it is advisable to check the latest SEBI and depository guidance before making important changes to a Demat account.
Most importantly, investors should never share their OTP, password or other confidential credentials and should immediately report any unauthorised transaction to their DP or depository.
