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What are DP charges and reason?

There are 2 depositories who work as custodian of our securities and their names are NSDL & CDSL. You need to open you’re demat account with Depository participants who are members of Depositories (Eg: IL&FS, Zerodha, ICICI Direct, Sharekhan etc). The Depositories participants would charge for their services whenever you sell any shares from your demat account and called as DP charges. DP charges are main source of revenue to the Depositories & its participants.

Normally four kinds of charges are being charged by the DPs on a demat account: account opening fee, annual maintenance fee, custodian fee, and transaction fee. The quantum of charges would vary from DP to DP.

  • Account-opening fee
  • These charges are for normally for managing the administrative expenses incurred for opening the Demat account, these are one time in the nature and charged at the time of opening of Demat account, lot of Dps are waiving off these charges as promotion.

  • Annual maintenance fee
  • This is additionally called as folio maintenance charges, and is usually levied in advance .It can be charged on annual or monthly basis.

  • Transaction fee
  • These fees charged mainly on monthly basis on all the transaction of buying /selling of securities to and from the account. The charges would depends on DP to Dp , some DPs, such as SBI, charge a flat fee per transaction, HDFC Bank and ICICI Bank pay the fee based on the transaction value, which would subject to a minimum amount. The transaction fee also would be different for buying and different for selling and would be based on the kind of transaction. Some DPs charge only for buying the securities, while some charge for both. In addition, service tax is also charged by the DPs

  • Demat / Remat fee
  • In addition to the other charges, the DP also charges a fee for converting the shares from the physical to the electronic form or vice versa. This charges may varies for both demat (physical-to-electronic) and remat (electronic-to-physical) requests.For demat transactions, some DPs charge a flat fee per request in addition to the variable fee per certificate, while others charge only the variable fee.