What will happen to my shares if my Demat account is frozen? How to unfreeze it?
A Demat account could be frozen due to various reasons, including some regulatory decisions. If your Demat account is frozen, no transactions can be carried out. If your account is frozen due to regulatory reasons, you'll be able to access your shareholdings once the issue is resolved.
After opening a Demat account, it's important to ensure its safety and security as all your investments in shares, mutual funds and other long-term investments will be linked to this. A Dematerialised account or Demat account is necessary if you are dealing with shares and other securities. For investments and all transactions related to shares, mutual funds, government securities and bonds, among others, a Demat account is necessary. The account carries all your records of investments and transactions in securities in electronic form.
However, you could face a problem in accessing your investments and transaction details if your Demat account is frozen. A Demat account could be frozen due to multiple reasons.
When is a Demat account frozen?
The Demat account can be frozen in two cases, a regulatory freeze or a voluntary freeze. A regulatory freeze occurs when you violate certain guidelines by the Securities and Exchange Board of India (SEBI). The conditions wherein a Demat account would be frozen due to regulatory reasons are:
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- The account has remained idle for three years and no transactions have been recorded.
- Account debits would be frozen if nomination is not completed by September 30, 2023.
- Other statutory and regulatory bodies, such as RBI, ED, CBI, and others can decide to freeze your Demat account if mandatory documents like Aadhaar card aren't submitted or any violation of law.
Voluntary freezing is also allowed if you can't access your Demat account due to travel or other reasons. Therefore, you can ask the broker to temporarily freeze your Demat account until further notice. Once the account is frozen, whether voluntarily or due to regulatory reasons, no transactions will be allowed.
What will happen to your shares if your Demat account is frozen?
When your Demat account is frozen, all corporate actions like dividends, bonuses and stock splits will continue to be distributed to you on a scheduled basis. However, as mentioned earlier, no transactions can be carried out via your Demat account. But, it’s important to note that all your shareholdings will generally be safe when your Demat account is frozen. Moreover, if your account is frozen due to regulatory reasons, you'll be able to access your shareholdings once the issue is resolved.
How to unfreeze your Demat account?
To unfreeze a voluntarily frozen Demat account or a regulatory frozen account, you need to carry out the KYC process again. You need to fill the form along with the required documents and complete the KYC process to activate the account. However, in case of a regulatory freeze, you might also have to provide additional documentation or comply with legal requirements depending upon the reason behind freezing the account.