How to Reactivate Your Trading Account?

How to Reactivate Your Trading Account?

Over the years, several investors opened a Demat and a trading account to begin their investing journey but failed and left both the accounts without closing them.
Many investors have received emails from their brokerage firms stating that their trading accounts have become “dormant” because they have not conducted any trades from the trading account.
After the current scandal by the Karvy Stock Broking Ltd, SEBI and stock exchanges have made strict norms for identifying accounts as dormant through a legal definition. In this article, let’s take a look at the difference between a Demat and a trading account and how an investor can reactivate their trading account in the time of their need.

If an investor has opened their Demat account with the help of a depository participant (DP) called full-service broker or discount, they are already aware of the difference between a Demat account and a trading account.
Understanding the difference between both accounts is essential because it helps several investors to know the importance of having both accounts while trading in the stock market.
A Demat account also called a “Dematerialized account”, where financial securities like bonds, shares, government securities and others are stored in electronic format to facilitate easy and safe trade for all the users.
On the other hand, a trading account is an account that holds all financial assets like equities and derivatives and differs substantially from several other accounts.
A trading account helps the investors to buy and sell shares within a day.
An investor can think of a Demat account as their wallet while the trading account as a slip to submit their payment to the stocks.
The combination of these accounts is known as “2 in 1” because most depository participants (DPs) offer this facility based on the assumption that investor’s wish to purchase and sell their shares.
Several investors ask a common question while starting their investing journey is; can I have only a Demat account without a trading account? In technical ways, the answer is YES. If an investor is looking to invest in an IPO, they do not need a trading account to purchase the stocks. They can open only a Demat account to hold all their shares for allotment.
However, if an investor wants to sell all those shares, they will have to open a trading account or look for solutions on how to reactivate trading accounts they had in the past, connecting them to your Demat accounts.

Trading accounts are considered inactive if there has been no past or current trading activity that has been taken place through that trading account.
The broker sets the time period for the inactivity of the trading account. However, as per the new rules and regulations, the time has been set to one year.
If a depository participant (DP) does not see any trading activity within a year, they have all the rights to deactivate an investor’s trading account without asking them.
If an investor is looking to trade in the stock market after taking a pause, they have to reactivate their Demat account first before reactivating their trading account.
Since the trading account is considered dormant, they have to clear all the dues, such as transaction fees, before closing their account.
To carry out both the actions mentioned above simultaneously, investors are required to activate their trading account before closing it.
Several scammers consider dormant trading and Demat accounts as a fishing ground to carry out illegal actions in the stock market.
Additionally, if an investor gets stuck in some situation where they have opened multiple Demat and trading accounts, they continue to get AMC charges even though they are not using it.
Then they have to find out possible solutions to reactivate their trading account and to shut them as soon as possible.

The procedure to reactivate a trading account is an easy task. However, in Demat accounts, they collect charges over time an investor has to pay off before closing their Demat account.
Here is a detailed guide on how investors can reactivate their trading account?
The first step in reactivating a trading account is to repeat the KYC process once again. Along with the KYC process, the investor also has to perform In-Person Verification as well.
However, due to COVID-19, the IPV process has been carried out over webcams and provided protocols that an investor has to follow.
The procedure for reactivating a trading account varies based on the Depository Participant, though the procedure and rules remain the same.
The customer has to seed a letter to the company’s head office or any other digital alternatives provided by the broker to close their DP and reactivate their trading account.
Investors can send copies of PAN card and AADHAR card to the company’s head office and can follow the instructions given by the office to reactivate their trading.
In this way, an investor can reactivate their trading account without any trouble.

  • What does an investor have to do before reactivating their trading account?
  • If an investor is looking to trade in the stock market after taking a pause, they have to reactivate their Demat account first before reactivating their trading account.
    Since the trading account is considered dormant, they have to clear all the dues, such as transaction fees, before closing their account.

  • What is the first step in reactivating a trading account?
  • The first step in reactivating a trading account is to repeat the KYC process once again. Along with the KYC process, the investor also has to perform In-Person Verification as well.

  • What is a Trading Account?
  • A trading account is an account that holds all financial assets like equities and derivatives and differs substantially from several other accounts

Final Thoughts

If an investor has multiple trading accounts linked to their Demat account and is not using their account, they can reactivate it to close down the account to reduce the cost and maintain a transparent flow.
However, if they are looking to enter into the equity world once again, then they can reactivate their inactive trading account by following the process given above to begin their trading and to make the most out of it once again.