What are Depository Charges (DP) Charges in Demat Account? | Espresso

What Do DP Charges Mean?

Stocks have always been attractive and a large segment of investors, mostly beginners, are keen on starting to play with shares. When taking a plunge into the online market for shares, few terms pop up very frequently. One of these terms is DP charges. Some new investors consider it one of those miscellaneous charges that they never really put much thought into. However, DP charges are not something so frivolous. DP stands for depository participant and the term refers to all depository charges. Take a look into understanding the what and why of DP charges.

Published on 06 February 2023

Defining and Understanding DP Charge

Now that you know what DP (Depository Participant) stands for, you also need to know what depository actually means. In the simplest version, a depository signifies a “place” where all shares are deposited. Whatever the platform for purchase of stocks might be, there is a single digital space that stores all stock investments for an investor. The demat account you opened is secure in a depository. depository charges are levied by the depository and the depository participant.

The primary depositories operable in India are-

  • Central Depository Services Limited
  • National Securities Depository Limited

Any brokerage can operate via these main depositories. Both these entities offer operations via demat account. Such accounts are mainly operable online. These accounts are common and most banks offer combined demat accounts with your current account itself. The demat account lets you hold all shares in an electronic format and thus, you are spared the need to hold a certificate signifying the share you hold in your name. Therefore, trading in company stocks has gotten easier with demat accounts.

The Depository Wise – DP Charges

Once you get to know ‘what are DP charges’ and their importance, you should also learn about the two main depositories and the part they play. Let's find out:

1.    NSDL [National Securities Depository Limited]

The UTI [United Trust of India] and NSE promote the NSDL as a depository. The Depository Participant, share transfer agent, clearing corporation, and other entities conduct countless functions for NSDL. The depository participants are known as business partners of NSDL.

To offer proper services to all the clearing corporations and customers, the DPs must become a member of the NSDL. You can utilize several NSDL services, but only as depository participants. But before doing anything, you should first open up a Depository Account.

Here, NSDL will charge you INR 17.50 [This is INR 4.50 + 13] for every sell transaction and each day as depository participant charges.

2.    CDSL [Central Depository Services India Limited]

BSE and various other public sector banks promote CDSL. DPs are said to serve as the intermediaries between you and CDSL. CDSL, on the other hand, records and manages the balance present in your banking by utilizing DPs.

The account stamen provisions from the depository participants during regular intervals with details on the securities and transactions will be available to you. The CDSL charges INR 18.50 [This INR 13 + INR 5.50] for every sell transaction each day.

Who levies DP Charges?

For instance, you open a demat account to trade in shares. Stocks are part of the CDSL or the NSDL--depending on if they belong to Bombay Stock Exchange or Nifty respectively. Therefore, you pay a charge to either of these depositories.

Now, your demat account is directly managed via a broker or mediating bank. This entity is known as depository participant. Some DP charges are levied on behalf of these mediating institutions.

Why are DP Charges Levied?

Now that you know what exactly the ‘DP charges mean’, do you know why these DP charges are levied?

Stockbrokers should become DP to offer a Demat account to all their clients. Furthermore, they also need to pay up the membership fee for the CDSL or NDSL.

Doing so will tune in lakhs with many other advanced prepaid transaction charges and fixed costs. The brokers will pass on all these DP transaction charges to all their clients for extra free to reclaim all these expenses effectively.

How Much Are DP Charges Levied?

All the charges that are levied by the depositories are the same when compared with the sell transaction charges. Let's check out the Demat transaction charges:

  • CDSL Demat Transaction Charges: INR 13 + INR 5.50
  • NSDL Demat Transaction Charges: INR 13 + INR 4.50

All the charges that are levied by the DP will differ greatly as it depends heavily on the participants. Here are some of the charges that are levied:

  • 20 per debit Transaction
  • 50 per debit Transaction [ For all the BSDA clients]
  • The charges mentioned in this section are exclusive of all the taxes.

Is Demat Account linked to DP charges?

Demat is the colloquial term for dematerialized account. In fact, in popular parlance, it is simply demat. Some might not even have known it had a full form until now! Demat accounts are very much linked to DP charges because these accounts enable you to trade in stocks—without which, you just could not! Such an account enables you to invest directly in equity. Therefore, DP charges come to apply only when you have transactions via a demat account!
Also Read: What is Collateral Amount in Demat Account?

Quick Titbit

  • A vital titbit to remember here is that you might be investing or trading via any share broker online. You simply need a demat account. However, the depositories are ONLY operational under the primary depositors mentioned above.
  • The advantage of this scenario becomes evident, when, in an unfortunate turn of events, a brokerage shuts operations. Even in such a case, account holders or investors can access their stock market instruments without worry.
  • This is a huge assurance for investors who feel a kind of cushion even in the event of brokerage disintegration. For offering such huge relief, the main depositories levy charges on every investor through a demat account. This is what DP charges actually mean.

Breakup of Charges

While you maintain an online demat account, you might come across another frequently levied charge called brokerage charge. This sometimes is considered synonymous with DP charges . The reality is far from it. The brokerage charge is payable directly to the broker—not the depository provider necessarily. Brokers need this service-oriented charge to offer the brokerage! In fact, they can charge relevantly because they in turn, make payments to the depositories. Again, depositaries also can charge an add-on brokerage fee—that technically becomes a part of DP charges, in such cases.

The Charges for Transaction

It is compulsory that you shell out DP charges whenever you make a holdings sale via a demat account. The Central depository has a daily, per company charge rate of INR 5.50 while the National depository charges INR 4.50 for the same structure.

  • Therefore, if you have a demat account with the Central depository, and close a sale of five shares—you will have to pay INR 5.50 per share sold for that day. If you hold the demat account with the other depository, the structure of charges remains the same but the rate declines by INR 1 for each share unit. Therefore, the base charge is fixed.
  • The amount doesn't go up as per the number of shares on sale. When conducting a sale on your shares, remember that the brokerage might also levy additional charges separate from these DP charges.
  • Before you begin to invest and stay around the stock markets, understand the charges, their structures and rates. This will prepare you for understanding the accounting at play during share trading.

Remember that even if you sell a huge quantity of shares, the DP charges from the depository end will still apply. This is akin to a flat fee for the transaction that multiplies per scrip for sale. However, the brokerage can waive off their part of DP charges. There are variable DP charges that the depositories charge on demat accounts at present. These include the initial fee for opening an account, maintenance charges and transaction charges . The first fee is an administrative charge and is one-time. However, lately depository providers offer to waive this charge off as a promotional measure.
Also Read: Understanding the Different Demat Account Charges

These charges are often termed folio charges and could be charged on monthly or one-time annual basis.

Remat Charges

Remat is a process wherein shares you hold in demat form are converted back into a physical form. All this needs is a share certificate re-issue. A depository charge flat charge for share conversion from the electronic form into physical form. Depending on the depository, you hold an account with; you either pay a single charge for every request of conversion. You might have to shell out this conversion fee and a charge for the certificate.
Also Read: How to Convert Physical Shares to Demat?

Last Note

It's crucial to have good information about the depository participants. That way, you will know about the depository charges. This post offers detailed information on depository charges and their importance. You will also gain information on why all these charges get levied and what is the transaction fee of NSDL and CDSL.


Chandresh Khona
Team Espresso

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