Trading Account - What is it and How to Reactivate it? | Espresso

What is an Online Trading Account and How Can You Reactivate It?

If you have ever engaged in the online trading of shares, then you must be familiar with the concept of an online trading account.



An online trading account allows you to buy and sell stocks in the share market. The stocks thus purchased are stored in a dematerialised form in a demat account. Although the terms demat and trading account are often used, the two are separate accounts.

Let us understand more about an online trading account and how you can reactivate it.

How Does Your Online Trading Account Function?

An online trading account is your vessel to trade stocks in the market; a demat account is a vault where the purchased stocks are saved. You can think of it as akin to a bank locker or an online wallet. Should you wish to trade the stocks, you need to transfer them to your online trading account first.

After transferring stocks from your demat account to your online trading account, you can use these stocks to take a short position in the market or engage in an outright sale of the stocks. The main reason why it is easy to confuse demat and trading accounts as being the same account is that they are mostly offered as a combined product by Depository Participants (DPs).

When Does Your Online Trading Account Become Inactive?

If you do not perform any trading of stocks from your online trading account for a certain period, then it becomes categorised as an inactive account. According to a circular released by the National Stock Exchange (NSE) on February 10, 2020, an online trading account that has witnessed no trading activity across exchanges for 12 months shall be considered inactive.

Gone are the days when there was no fixed time ceiling when an online trading account became inactive. Due to the widespread occurrence of financial fraud in the stock market in recent years that had its roots entrenched in the misutilisation of inactive trading accounts, the time ceiling of 12 months has been mandated to segregate active and inactive online trading accounts.

How to Reactivate Your Online Trading Account?

If your online trading account has been inactive account for more than a year, it is advisable to reactivate it in both of the following scenarios:

  1. When you wish to close the account altogether.
  2. When you wish to restart trading in stocks using the account.

It is important to note that even if you want to close your online trading account, you must reactivate it first. This can be done by following a simple process, which has been discussed below.

  1. Contact the Depository Participant (DP) with which you have an inactive online trading account.
  2. Initiate the process for reactivating your online trading account by submitting your latest Know Your Customer (KYC) details to the DP. These details are usually required to be submitted in person. However, due to the ongoing COVID-19 pandemic, most Depository Participants have enabled virtual KYC through a digital IPV.Such a process is carried out with the help of phone or laptop cameras to verify the identity of the person submitting the account reactivation request.
  3. Once your online trading account has been reactivated, you can either submit a request to your DP to close it or trade stocks from said account.

To Sum it Up

Just as it is important to stay abreast of the transactions in your bank account, it is pivotal to ascertain what activities or lack thereof are going on in your online trading account.

Suppose your online trading account has remained in the category of inactive trading accounts for longer than a year, then you must submit a request to your Depository Participant to reactivate the account to ensure that it is not misutilised.
Also Read: How to Transfer Money from Demat Account to Bank Account?


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Frequently Asked Questions

If your online trading account has been in the category of inactive accounts for less than 12 months, then it is not mandatory to request a new in-person verification for KYC.

According to a circular released by the National Stock Exchange (NSE) on September 27, 2021, such a step is mandatory only if your online trading account has been in the category of inactive accounts for more than a year. However, it is advisable to reactivate an inactive online trading account at the earliest to prevent any mis-utilisation.

In the context of the KYC process for the reactivation of an inactive online trading account, an In-Person Verification or IPV is a step wherein the account holder has to produce the original documents for identity and address proofs. Although this process is meant to be carried out in the offices of a Depository Participant (for demat and trading accounts), digital IPVs have now been permitted.