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Journalism of Courage
Demat account opening charges and custody charges for retail investors will be abolished soon. Market regulator Securities and Exchange Board of India (Sebi) has also indicated the possibility of a reduction in other charges, with respect to dematerialisation of securities.
The announcement was made by G.N. Bajpai, chairman, Sebi, while delivering the valedictory address at the three-day International Conference 2005 on ‘‘Emerging Markets: Challenges and Prospects’’ in Mumbai.
‘‘Retail investors are genuine investors and as an incentive to them to go for dematerialisation, we are proposing the abolition of account opening charges. Retail investors neither frequently trade on the market nor they are they speculators; hence, custody charges for them should be done away with and hence, along with the account opening charge, custody charge for crediting the security will also be abolished,’’ he added.
Bajpai indicated that the tentative time schedule for implementing the announcement will be from February 1, 2005.
The depositories collect five different charges from the depository participant, which in turn pass on these charges to retail investors. These charges are account opening charges, custody charges, transaction charges, account maintenance charges and account closing charges.
Bajpai also indicated that there is scope for reduction in two more charges related to the dematerialisation of securities. These charges are transaction charges and account maintenance charge. As these retail investors do not trade frequently and are perceived to be long-term investors, it is not desirable to collect these charges from them, he added.
While welcoming the Sebi move, Manubhai Shah, investors’ rights activist and chairman, CERC said: “this is definitely a welcome move. Sebi has acted on the recommendation of the Bhave committee on dematerialisation, of which I was also a member, after a period of two years.’’ The market regulator should now concetrate on more serious matters like fraudulent transfer of demat holdings of the investors, he said.
