The full form of DP Charges is Depository Participant Charges. DP charges are a common issue inonline share market investments, often overlooked by new investors. They are referred to as Depository Participant Charges and are a part of the Demat account, which holds the digital storage of shares.
In India, twotypes of Demat accounts are provided by brokers: CDSL (Central Depository Services Limited) and NSDL (National Securities Depository Limited). Regardless of the broker, the Demat account operates under one of these depositories, ensuring the safety of investments. DP charges are charged by the two depositories to maintain the security of the investments. The fee is a crucial service provided by these depositories to maintain the safety of investments. Let’s understand what is DP charges in detail.
DP Charges Meaning
When you sell a stock, the broker or depository participant asks CDSL orNSDL to release the stock you want to sell. Once the depository releases the stock and it's ready for sale in your trading account, a fixed amount is deducted from your account as DP charges. These charges are then split betweenCDSL/NSDL and your broker.
Unlike other fees, such as brokerage or stamp duty, DP charges are set at a fixed rate. This means whether you sell one share or a thousand shares, the charge remains the same. Interestingly, these charges don't appear on the contract note sent by your broker; instead, they are added to your account ledger.
Some investors mistakenly believe thatBTST (Buy Today Sell Tomorrow) trades are exempt from DP charges, but that's not the case. These charges apply regardless of the type of trade you make.
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Table of Content
- DP Charges Meaning
- Who Levies DP Charges?
- Depository-Wise DP Charges
- Why Do Depository Participants Levy DP Charges?
- How Much Do You Pay as DP Charges?
- What Are DP Charges Used For?
- Different TypesofDP Charges
- BlinkX Offers a Variety of No-Frills Broking Services
Who Levies DP Charges?
NSDL, CDSL, and other depository participants in India charge DP fees. If you sell a stock on the NSE, you'll pay NSDL as part of the DP charges. When you sell a stock on the Bombay Stock Exchange (BSE), a part of the charges goes to the CDSL. A Depository Participant acts as an intermediary between investors and NSDL/CDSL.
In addition to stock DP charges, investors pay four types of fees to DPs - Demat account opening fees,Annual Maintenance Charges (AMCs), transaction fees, and custodian fees.
Depository-Wise DP Charges
Here are the Depository-wise DP Charges:
National Securities Depository Limited (NSDL)
The NSE and Unit Trust of India (UTI) jointly promote NSDL as a depository. The NSDL performs various functions through its Depository Participants, clearing corporations, share transfer agents, and other entities.A Depository Participant is also called NSDL's business partner. Customers and clearing corporations can only access DP services if they are members of NSDL. Various NSDL services can only be accessed through DPs. However, you must first open an account with the DP.As DP charges, the NSDL charges INR 17.50 (13+4.50) per sell transaction per day.Central Depository Services India Limited (CDSL)
Public sector banks, as well as the BSE, promote CSDL. DPs act as intermediaries between you and the CSDL. Your account balances are managed and recorded by CSDL using DPs. DPs provide you with account statements at regular intervals with information about your transactions and securities held.
Why Do Depository Participants Levy DP Charges?
Even though DP charges are higher for investors, they're necessary for DPs to stay in business. DPs need to register with NSDL and CDSL before offering Demat account opening services to customers. It costs them a lot to pay CDSL, NSDL, and SEBI for this.
Financial institutions or stockbrokers who want to be DPs have to pay SEBI fees, application processing fees, training fees, refundable security deposits, software maintenance fees, insurance premiums, connectivity fees, and internet registration fees. By charging investors, DPs are able to recover the upfront costs of getting their licence from SEBI, NSDL, and CDSL.
How Much Do You Pay as DP Charges?
DP charges refer to fixed fees that remain regardless of the securities quantity involved in the transaction. They are typically Rs. 12.5 plus 18 percent GST per share per day, regardless of whether an investor sells or buys a single share or a large quantity of shares.
For example, if an investor sells 100 shares of XYZ from their Demat account on a Monday, they would pay INR 12.5 plus 18% GST for the transaction. If the same investor sells 100 shares of XYZ and 100 shares of ABC on the same day, they would pay INR 12.5 plus 18% GST for each stock, resulting in a total DP charge of 25 plus 18% GST. This fixed structure simplifies the calculation process and ensures transparency in fee assessment.
What Are DP Charges Used For?
Depository Participants impose charges to recover the cost of offering demat services to investors. They offer a range ofdemat account-related services including the creation and maintenance of demat accounts, processing of transactions, provision of statements, etc. These services come with a price tag that covers a range of costs, including salaries, infrastructure, technology, and regulatory compliance.
Additionally, Depository Participants make investments in their infrastructure and technology to boost the effectiveness of their demat services. For instance, they might spend money on technologies that enable mobile transactions and online account opening. These investments need a large amount of capital, and DP charges help in recouping these costs. Click here to know more aboutredemption of debentures.
Different TypesofDP Charges
DP charges are crucial for investors if they want to effectively manage their investments and understand the cost structure of their demat account. It is advisable to read the terms and conditions carefully to understand what are DP charges and the other associated fees are beforeopening a demat account.
Account Opening Charges
As the name suggests, DPs impose account opening charges when a new demat account is opened using a demat account app.These fees can be a few hundred to several thousand rupees and vary from DP to DP. The cost of providing account opening services, such as confirming the investor's identity, processing the application, and issuing the demat account number, is usually included in the account opening charges.Account Maintenance Charges
This cost varies from DP to DP and is often imposed annually. The expense of providing services like maintaining the demat account, updating the account holder's information, sending account statements, and offering customer support is covered by the account maintenance fees.
Example:
Consider an investor, who maintains their demat account with DP Company X in India. Company X charges an annual account maintenance fee of ₹2000 to cover the costs of services like updating account information, sending account statements, and providing customer support. This fee ensures the smooth functioning of an investor’s demat account throughout the year.Transaction Charges
DPs impose transaction fees for handling transactions in a demat account. For a variety of transactions such as purchasing or selling securities, transferring securities between demat accounts, transnational charges are imposed.
Example
An Investor, with DP Firm A, conducts transactions. They pay ₹20 for buying 200 shares of Company X and ₹25 for selling 150 shares of Company Y. Transferring 100 shares of Company Z costs ₹15, and buying 300 shares of Company W incurs a fee of ₹30. In total, Investor pays ₹90 in transaction charges to DP Firm A for these activities.Depository Fees
Thedepository, a central organisation that keeps securities in electronic form, charges depository fees. The DPs are subject to depository charges, which they then pass along to investors. These fees pay for the maintenance of the communication networks, servers, databases, and other depository infrastructure.Custodian Charges
Custodian charges are imposed by those who keep securities for investors as custodians. Institutional investors including pension funds, insurance firms, and mutual funds employ custodian services. Custodian fees pay for the cost of keeping the securities secure, handling transactions, and giving investors reports.
Example
Let's consider a pension fund, Investor Mr. X, employing the services of Custodian Firm B to safeguard its securities. Custodian Firm B charges a fee of 0.1% annually on the total value of the securities held. If Investor X has securities worth ₹1,000,000, the annual custodian charges would be ₹1,000 (calculated as 0.1% of ₹1,000,000). These charges cover the costs of ensuring the security of the investments, managing transactions, and providing regular reports to Investor X.Charges For SMS And Email Alerts
DPs charge investors for sending SMS and email alerts for certain demat account-related events. Investors may receive alerts regarding the debit/credit of securities, balance statements, and transaction statements, for instance. These notifications, which are billed either regularly or annually, assist investors in keeping track of their demat account.
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BlinkX offers investors the opportunity to save more by waiving off the charges associated with opening a Demat account, making it easier and more accessible to start investing in thestock market. Its competitive Depository Participant (DP) charges ensure that investors can maximise returns without incurring excessive fees, allowing them to manage their investment portfolios and achieve their financial goals.
Conclusion
DP charges are essential for investors to manage their investment portfolios and navigate the stock market. They cover expenses for maintaining accounts, processing transactions, and ensuring regulatory compliance. These charges are fixed and vary between Depository Participants like NSDL and CDSL. Understanding these charges helps investors navigate the stock market more effectively and optimise their investment strategies. DP Charges refer to fixed transaction fees irrespective of the quantity sold. Learn more about DP charges and how to avoid them with a reliable
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