Investors need a Demat account to start investing in the stock market.
A Demat account holds shares and securities safely in an electronic format. You
can buy and hold your shares in the Demat account. But if you want to sell your
shares and securities, you need to open a trading account.
Without a trading account, you cannot sell your shares. Most
stockbrokers provide a Demat and Trading account together. So if you are new to
investing, you should always open a Demat and trading account.
Inactive Trading Account
A trading account that has no trading activity for a specific period
of time is known to be an inactive trading account. Earlier, an investor’s
account was turned inactive or dormant if no trading activity was recorded for
a brief period of time. This can be within eleven months to five years
depending on the stockbroker’s policy.
Note: Dividend receipt, Stock split, Bonus are not
considered to be a part of active account activity.
New Guidelines for Inactive Trading Account
After the recent scandal at Karvy stockbroking, stock exchanges have
tightened the rule for trading accounts. According to the new guidelines, if a
trading account does not have any trading activity for a year and more, then
the account will be turned into an “inactive” or “dormant” account. These new
guidelines are to prevent any fraudulent activity and misuse of trading
accounts.
These new guidelines are only applicable for Trading accounts. Your Demat
account will remain activated until you give the provision to your DP to freeze
the Demat account.
Can You Reactivate a Trading Account?
Yes, you can reactivate a Trading account.
How Can You Reactivate a Trading Account?
Based on the new guidelines, if your trading account has become
inactive, you can reactivate the account in the following way:
Firstly, you have to repeat the KYC process. Due to the
pandemic situation, you can do the KYC verification process online. You are
also mandated to do the in-person verification (IPV) process.
Secondly, you have to intimate your DP that you wish to
reactivate your trading account. You can do it by sending a letter over courier
to the company address, or you can do it online if your stock broker can provide you with any digital option.
Thirdly, you will also need to provide a copy of your
PAN and Aadhar card as proof of identification.
Note: The procedure mentioned above can slightly
vary depending on the stockbroker and their policy, though the basics will remain
the same.
Conclusion
There are a host of opportunities in the world of trading. But you can
also use the opportunities when you are vigilant and proactive. If you aim to
be a short-term investor then you may not require to re-activate your trading account.
But if you are willing to be a long-term investor, ready to take the
risks in the market and stay invested for years, then you should reactivate
your trading account and begin your endeavors once again.
