DP Charges in India - A Comprehensive List

A demat account is a mandatory prerequisite for trading in the Indian stock market. You cannot buy or sell shares through the primary or secondary market without a demat account. However, when you open a demat account, you are obligated to pay certain one-time and recurring fees known as DP charges. Wondering what they are? Here’s a comprehensive guide on what DP charges mean, their different components and who levies these charges.

To open such an account, you need to get in touch with a Depository Participant (DP). DPs are entities that are empowered by the depositories - NSDL and CDSL - to open demat account.

Although depositories like the NSDL and CDSL are the only two entities offering demat accounts in the country, you cannot open an account by approaching them directly. Instead, you need to get in touch with a depository participant (DP), which is an intermediary entity empowered to open demat accounts.

What are DP Charges?

DP charges, or depository participant charges, are fees that investors pay to their depository participant (DP) for holding and managing their demat accounts. Think of a demat account as an account that holds your shares and securities in electronic form. Just like a bank charges you for various services, your DP also charges fees for the services they provide. Every time you buy or sell shares, your DP ensures these transactions are accurately recorded and maintained. The DP charges cover the cost of these services, including the maintenance of your account and the cost of accessing their platform.

Who Levies DP Charges?

Now that you’re aware of the full form of DP charges, let’s take a look at who levies it. But before we go ahead, here’s a quick overview of how demat accounts are opened.

In India, there are two depositories - NSDL and CDSL. These two entities are the only ones offering demat accounts in the country. However, you cannot open an account with them directly. Instead, you would have to go through an intermediary entity known as the depository participant (DP). The DP is not only empowered to open demat accounts but also acts as the link between the account holder and the depository.

It is the depository participant who levies DP charges for the various services that they provide. Demat account opening charges, account maintenance charges (AMC), and transaction charges are a few of the fees that are commonly levied.

Why are DP Charges Levied?

The depository participant provides a host of services to demat account holders. The levy of DP charges makes up for the cost of providing these services and acts as a source of revenue for the participant. In addition to this, every DP is required to pay a membership fee to the depository they’re associated with. By charging these fees, they can recover a portion of this cost, if not entirely.

Elements of DP Charges

There are several components that make up the total DP charges and understanding these can help you manage your investment costs better. Here are some of the most common and notable ones:

• Account Opening Fees:

  Some DPs charge a fee to open a demat account. However, online platforms like m.Stock offer free account opening and a seamless online onboarding process.

• Annual Maintenance Charges (AMC):

  This is usually a yearly fee (sometimes quarterly) for maintaining your demat account. It covers the cost of record-keeping and other administrative services provided by the DP.

• Transaction Charges:

  These are fees for every transaction you make, whether you are buying or selling shares. It’s similar to the transaction fees some banks charge for handling money transfers or bill payments.

• Custodian Fees:

  This is a fee for safeguarding your securities in the demat account. Think of it like a locker fee you might pay a bank to store valuables safely.

• Pledge Charges:

  Pledging your existing holdings gives you leverage to buy shares even in case you don’t have the necessary margin to execute a trade. This is done by pledging your shares as collateral in return for a loan from the broker. The DP charges a fee for this service, much like how banks charge a fee for securing a loan against assets.

Individual DPs may have additional elements that are charged as a one-time or a recurring fee. Therefore, it is vital to understand the charges clearly, and hidden costs (if any), before deciding on a DP to open an account with.

How Much DP Charges are Levied?

The depositories have given their participants the freedom to levy DP charges as they see fit. This means that the fees that you need to pay would depend primarily on the depository participant with whom you have a relationship. Here’s a table outlining the different DP charges levied by depository participants.

m.Stock's DP charges vs Industry

With the aim to provide high quality services at low-cost services, m.Stock by Mirae Asset offers one of the most competitive DP charges in the entire market. The table below will give you a clear picture of your potential savings through m.Stock:

Conclusion

As you can see, every depository participant levies DP charges. These charges are a crucial source of revenue for the participants and allow them to recover the various fixed and variable costs that they would have to bear. However, as an investor, it is important to ensure that you choose a depository participant, like m.stock, that levies nominal fees. This way, you can reduce your out-of-pocket costs and protect your profit from taking a hit.