With a growing number of Indians beginning to invest in securities, the total number of Demat accounts in India hit 15.10 Cr. in March 2024. The National Stock Exchange (NSE) also reported a growth in its number of active clients for the 9th consecutive month, once again hinting at the steady increase in the opening of new Demat accounts.
Among the various authentication requirements and other complexities associated with Demat accounts, (DDPI) might confuse new investors. This comprehensive blog will guide you through the ins and outs of DDPI, aiming to give you a clear understanding of DDPI meaning and what it does.
The DDPI full form stands for Demat debit and pledge instruction. Securities need to be withdrawn when you purchase a sell trade. It is the depository participant or broker’s responsibility to withdraw a sold security. However, they cannot perform the transaction without authorization from the account holder. By submitting a DDPI, you grant your broker or DP the authority to withdraw securities thereon.
Now that you understand the DDPI meaning, let’s figure out what makes it important. Submitting this document permitting your broker or DP to withdraw securities, you enable them to perform the following functions:
Pledging or re-pledging securities in your Demat account for margin trading.
Withdrawing securities from your Demat account and transferring them to the stock exchange when executing sell orders.
Debiting mutual fund units from your Demat account when you sell them.
Transferring shares from your Demat account when you participate in tender offers such as delisting, buyback, or takeover.
Thus, Demat debit and pledge instruction DDPI authorises the depository participant or broker to perform several crucial tasks.
While your queries regarding the DDPI full form and purpose have hopefully been cleared up, a question remains – What is the benefit of using DDPI in Demat account?
Increased efficiency in settlements: The implementation of DDPI streamlines how the debiting and pledging of securities are authorised.
Strengthened security: Demat debit and pledge instruction DDPI also helps make securities transactions safer by reducing the risk of unauthorised transactions and misuse.
Improved compliance with regulatory changes: Demat account users submitting the DDPI request can comply with SEBI’s latest guidelines, which are driven by the body’s commitment to protecting the integrity of the securities market.
Enhanced control for investors: With DDPI, investors gain better control over their Demat accounts. The new mechanism is more investor-friendly, allowing them to authorise specific actions in their accounts with greater discretion.
Increased transparency: The debiting and pledging processes for securities are now more transparent, thanks to the transition to DDPI.
Having understood the DDPI meaning and its benefits, you might be wondering what’s to happen to existing POAs and how the transition to DDPI would affect those Demat accounts. Here’s what you need to know:
Investors who submitted their POA request by September 1, 2022, don’t necessarily have to transition to DDPI. They are free to stick to POA as long as they choose.
However, DDPI has been made the norm for all new Demat accounts created on November 18, 2022 onwards – which means POA is no longer an available option for these newer accounts.
Account holders who haven’t submitted a request for either of the two will have to use an Electronic Delivery Instruction Slip (E-DIS) until they decide to submit a DDPI request.
For the sake of improved account security, it is recommended that investors with POA-enabled Demat accounts switch to DDPI.
Here’s how Demat debit and pledge instruction differs from POA, which was previously the norm:
|
Points of Difference |
POA |
DDPI |
|
Purpose |
Versatile and can be used for various trading and non-trading purposes. |
Focused narrowly on Demat transactions |
|
Scope of Authorisation |
Offers broader authority to the broker or DP |
Only authorises transactions related to the debiting and pledging of securities |
|
Security |
Poses a risk by allowing the authorized DP or broker to handle various aspects of a Demat account |
Significantly reduced risk of misuse and fraudulent transactions |
|
Regulatory Compliance |
Risks associated with POA raised regulatory concerns |
DDPI is now the standard as per the latest regulatory requirements |
SEBI introduced DDPI in the stock market with a circular in 2022, replacing the power of attorney (POA) that brokers and depository participants previously had over the withdrawal of securities. This authorization method was the solution to various security and regulatory concerns arising from the broad authorization granted to brokers and DPs by POAs.
While some brokers allow you to submit a DDPI request online, others only have an offline facility. In the case of the latter, you must print the DDPI form from the official website, fill in the details, and send it to the broker’s office. Follow these steps to submit a DDPI form online:
Open your trading cum Demat account via the broker’s dedicated online trading platform.
Find the “Submit DDPI” section in your profile and click on it to access the DDPI form. Fill it accurately with all the necessary details.
Make sure the DDPI form also comes with an e-Stamp form, which is mandated as per regulatory requirements.
Both forms will need to be electronically signed. You might be asked to input your Aadhaar card details and a one-time password (OTP).
Confirm your mobile number and submit the DDPI request. It should be processed within two to three business days.
DDPI has been a game-changer for stock market traders. With the broker or DP authorised to perform the transactions, users don’t have to authorise them manually using the e-DIS process. This saves them the hassle of entering T-PINs and OTPs. Likewise, brokers and DPs benefit from DDPI as it lets them pledge and re-pledge shares more efficiently.
Brokers and depository participants usually charge a one-time fee to enable DDPI. This charge is levied against the e-Stamp form and DDPI form they provide. For your DDPI request to be approved, you must pay the required fee. For most brokers, the amount is INR 100. However, some brokers may charge a fee of INR 175 instead. It is advised to enquire about the DDPI fees and other Demat account charges to get a clear idea before you apply for DDPI through a broker or DP.
While getting your Demat account DDPI-approved would incur a small fee, it is highly recommended to get it done. DDPI enables you to trade more securely and conveniently, without giving up too much control over your Demat account to the broker.
To sum it up, DDPI has played a crucial role in making securities transactions on Demat accounts more efficient, secure, and transparent. It is, without doubt, an important document for those seeking to enjoy seamless Demat account operations and a more convenient stock trading experience. Now that you have a clear understanding of the DDPI full form, DDPI meaning, and how to apply for it, activating DDPI on your Demat account shouldn’t be an issue.
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