Tips to keep your demat account safe from fraud

The risks associated with financial securities have dropped off considerably since the introduction of the demat account. Security transfers are quick and easy. You are less likely to lose or damage your security certificates. Even considering the demat account charges, overall costs are much lower than they used to be when physical certificates were in circulation. And there are many checks and balances that safeguard your financial holdings. But demat transactions are not completely free of risk.

Safeguard your demat account

As the holder of a demat account, it is your responsibility to monitor transactions happening through your account. Here are some tips to help you stay vigilant.

  1. Update your contact details

Ensure that the depository and the depository participant (DP) with whom you hold the account have your current phone number and email address. Otherwise, someone else may receive important SMS and email alerts, and they could get a hold of your demat account information. Further, you might miss out on timely updates that could alert you to unauthorised transactions being made through your account.

  1. Check alerts and statements

The Securities and Exchange Board of India (SEBI) has mandated all DPs to send SMS alerts every time shares are debited from your account. If any transaction details or demat account charges seem incorrect, inform your DP at once. As everything takes place digitally nowadays, your holdings can be tracked. It may happen, for example, that shares have been transferred but the buyer has not yet sold them to a third party. In this case, the DP might be able to help you to recover your holdings. But if you delay, it could happen that the shares have changed hands multiple times and recovering them might be difficult. It also helps to review your transaction and holding statements at regular intervals to spot discrepancies.

  1. Transfer excess funds

Don’t let excess funds lie idle in your account if you are not about to make any transactions. Transfer the funds to your savings account for safekeeping. A better approach is to move adequate funds to your account just before a purchase. This way, if fraudulent individuals do get a hold of your demat account information, they will have access to a limited amount of capital.

  1. Protect DIS booklet

The debit instruction slip (DIS) booklet is like a chequebook for your demat account. When you transact, you have to fill in a DIS. Here, you must provide the asset details, lot size, and other information, and sign in the relevant column. Never leave a signed blank DIS with your broker, for that is akin to a blank cheque.

  1. Freeze account when not in use

Anytime you are travelling abroad, chances are that your registered phone number will not work. That means you will also not receive the SMS and email alerts relating to your account. Rather than leave the demat account unattended, contact your DP and freeze the account. That way, debits from the account will be barred but you will continue to receive interest and dividend payments, rights issues, and bonus issues. When you return, simply unfreeze the account.


While the demat system is quite secure, criminals keep thinking up new ways to commit fraud. So, take these small steps and safeguard your account. It also helps to open a demat account with a transparent and reliable DP like Kotak Securities which has strong security measures in place. After all, one can never be too careful.

Leave a Reply

Your email address will not be published. Required fields are marked *