Buying and selling equity shares directly was an irksome job about two decades ago. In an era where electronic trading platforms were absent, buyers held share certificates in a physical form and were expected to preserve it safely as a proof of ownership in a company. Handling share certificates was tougher than most of new generation investors may think today. But as electronic trading platforms replaced the traditional system, holding share certificates in physical form became a thing of past. This is because as dematerialisation of shares came into effect, most investors had to surrender their share certificates for them to be held in electronic form in the demat account. India has achieved tremendous success in the transition from physical delivery based system to dematerialisation.

It is observed that many people open a demat account with great enthusiasm, but often don’t actively use it later. This typically happens in case of those who open accounts:

• To sell off old shares held in physical form for long; and
• To apply for the Initial Public Offerings (IPOs)
  
  

It is vital to note here that there is a category of old generation investors who held shares of some companies by the virtue of being beneficiaries of convertible debentures which they held in the past. Those who held onto such shares for very long time, made astonishingly high gains in past many years. Many such investors are now in their 60s or possibly in 70s, who emptied their demat account (for whatever possible reasons) and have kept away from equity but haven’t closed their demat account after getting rid of shares.

Likewise, there are many who opened a demat account to subscribe to IPOs with the motive of listing gains and there are even those who have invested in shares for the long-term; but have kept their demat account idle for long.

What happens when you don’t operate your demat account for long?
Well, when a demat account is not operated for long it is termed as inactive by the depository participant before it gets classified as dormant. There is no fixed rule on how long a demat account can remain inactive. It varies as per the agreement between you as the client and the depository participant (which could be your bank or broker). A dormant demat account precludes you from buying and selling securities unless you reactivate it.

Usually, depository participants do not classify an inactive account as dormant if the account holder has paid their annual maintenance fees on time. Before categorising a demat account as dormant, some depository participants do follow the practice of intimating the client about the same. And if you still don’t use your account within the stipulated period, finally it is classified as dormant.

What is the process to reactive a dormant demat account?

• Call the customer service executive or write a mail or you may also send a letter for reactivation
• Settle all demat maintenance dues
• Pay reactivation charges (which are usually less than Rs 500, but can be waived if valuation of existing shares in your account is high)
• Satisfy Know Your Customer (KYC) requirements again
  
  

So, the process is pretty simple. But PersonalFN is of the view that you should be paying your annual maintenance fees on time and keep a regular check. Also you should keep monitoring your portfolio at regular intervals, because after all investing is not a one-time activity. But that does not to say that you should be churning your portfolio either. Those who don’t have time or expertise to manage an equity portfolio on their own, should take the mutual fund route and invest in appropriate diversified equity oriented funds.

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