Why do you need a Single Demat Account?

One of the most harrowing experiences in India is to complete the transfer of assets after a person has passed away. Often, the heirs are clueless about a person’s investments; there are innumerable complaints of harassment faced by nominees, even for transfer of money lying in bank accounts. Then there is the problem with physical paper. Fixed deposit (FD) receipts, savings certificates and passbooks are often tucked away in cupboards, lost, misplaced or unaccounted.

The numbers indicate the size of this problem. Unclaimed bank deposits of over Rs3,600 crore have been transferred to a depositor education fund by the Reserve Bank of India (RBI) a couple of years ago. Unclaimed dividends, interest and redemption of deposits transferred to the Investor Education & Protection Fund aggregate well over Rs1,000 crore; unclaimed insurance policies are approximately Rs1,700 crore. The largest of all—nearly Rs26,000 crore—is lying unclaimed in provident fund accounts, says a business daily. 

Imagine having a single demat account, with a single know your customer (KYC) registration, which holds all your financial assets, such as corporate fixed deposits, bank fixed deposits, corporate bonds, gold bonds, National Savings Certificates, Kisan Vikas Patras, pensions products, insurance policies, etc. Every investor can then receive an updated statement of his complete assets every month. A change of address to update the KYC or change in nomination, bank account, etc, will also be at a single point and, in case of death, the transmission of all assets can also be made easy. It will also be easier to track interest/dividend earnings or the transfer of redemption proceeds to bank accounts linked to the depository account. 

 The process of obtaining duplicates for physical paper that is lost or misplaced is arduous, if not impossible. However, when stored electronically, the onus shifts to depositories, who are obliged to obtain a comprehensive risk cover and indemnify investors for the assets.