Why you should include nominee in Demat account?

Published on : 07:49 AM Jan 25, 2022

A Demat account is like a bank account for your share certificates and other securities that are held in an electronic format. It was introduced in 1996 for trading at NSE to do away with paperwork. Today, there's no paperwork involved and physical certificates are no longer issued.

Hyderabad: With the stock markets hitting new highs, many are coming forward to invest. But, to do trading at National Stock Exchange (NSE) one should have a Demat account. Earlier, opening Demat‌ and trading‌ accounts was a tough task. But now, these accounts can be opened instantly, thanks to technology. While mentioning the nominee, too, become easier than ever. Let's find out why the inclusion of the nominee in the Demat account is mandatory?

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A Demat account is like a bank account for your share certificates and other securities that are held in an electronic format. It was introduced in 1996 for trading at NSE to do away with paperwork. Today, there's no paperwork involved and physical certificates are no longer issued.

Demat nominee: You should always write the nominee's name in a column that is provided when you are opening a bank account, investing in fixed deposits, mutual funds and taking insurance. Why it is important to include the nominee? because nobody can predict what will happen the next moment. Therefore, as a precautionary measure, banks, investment agencies and financial institutions made the inclusion of the nominee's name mandatory. Advertisement

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If you fail to include the nominee's name while opening the Demat account or investing your parents, children and siblings may bear the brunt as there is the possibility that they may face difficulties though they have the right to claim them. Apart from that, you can also mention how much percentage you would like to give to the nominees.

Demat account nominee rights: If there is no nominee for your accounts and investments .. it can be very embarrassing for the heirs when they have to claim them in any unforeseen event. Many documents like a 'Will' and certificate of inheritance are required. All these difficulties can be avoided by including the nominee's name while opening the Demat account and you can also nominate more than one nominee.

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Central Depository Services Limited (CDSL) nomination online: Although it is possible to open a Demat account digitally, a separate application would have to be submitted for the nominee. But, recently SEBI amended these rules. Facilitated nomination of a nominee through e-Sign. From October 1, 2021, those who have opened Demat accounts will be required to mention the name of the nominee.

Those who have opened accounts can include or change the name of the nominee. However, those with joint accounts will need everyone's signatures to add or change the nominee's name. The DP (Depository Participant) will have the prescribed application form for the nominee's name. It needs to be completed and delivered. It will also require the signature of a witness.

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Last date for including the nominee's name in the Demat account: As per the regulations of the Securities and Exchange Board of India (SEBI) Demat clients should submit nominations for their accounts by March 31, 2022. Otherwise, your accounts may be terminated. So, see if there are nominees for your accounts--make it a point to mention the name of the nominee immediately--the important thing to remember is that the name of the nominee can be changed at any time, says Ramkumar, Chief of Business, CDSL.

Also read: Sebi proposes to separate KYC and account opening process

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