A friend of mine just got a call from his relationship manager at a bank brokerage firm. The RM apparently said that if you don’t trade atleast once a month, your trading and demat account will become dormant or inactive and he will not be able to operate it. My friend is a passive investor who only invests once in a while. He is now worried.
So yeah, there are two accounts everyone has:
- Trading (which you use to buy/sell on NSE/BSE exchanges)
- Demat (A safe vault for your stocks & securities with NSDL/CDSL Depositories)
A trading account is considered inactive (dormant) if there are no trades on the exchanges for 12 months. A demat account is considered inactive if there is no activity (no credit/debit to your demat account) for more than 6 months.
What happens if your account is inactive or dormant?
For an inactive trading account, you have to do a re-KYC to reactivate the account. Most brokers today have an option to do KYC online.
For a demat account, if the buy/sell transaction is happening through the trading account, there is no issue if your account is inactive. If you want to do an off market transfer when the demat is inactive, the DP or broker might call you up to reconfirm the transaction. Check this
In any case, this isn’t a big deal. You can easily do a re-KYC. If a that RM called your friend up, he probably has some brokerage or revenue target and is potentially misleading your friend to trade more. The next time he calls your friends, ask him to tell the RM that you will complain to SEBI about this. I am sure those calls will stop.
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