To be sure, the activity need not just be in stocks; it could be in any segment of an exchange and for the smallest possible value. But if there is no activity for 24 consecutive months, the account will be flagged as ‘inactive’ and no new transaction will be allowed in the broking account.
Once a broking account turns inactive, you have to follow the re-KYC (know your customer) process, which can be done online in most cases. Here is a look at how this process works, what happens to your holdings if an account turns ‘dormant’ and hacks to keep the account active.
When an account turns ‘inactive’
The no-activity window, initially set for 12 months, was extended to 24 months in October last year. The rules stem from market regulator Securities and Exchange Board of India’s 2009 directions to increase transparency in brokers’ dealings with clients.
Exchanges have widened the scope of transactions beyond just stock trading activity. Bidding in an IPO, and buying or selling sovereign gold bonds and mutual funds would also be considered. Any transaction in any segment of the exchange will help keep the account active.
Non-financial transactions such as modifying your e-mail ID, mobile number and address through the same broker are also considered now.
While you can’t place fresh buy and sell orders once the broking account turns inactive, the demat account and holdings remain intact. You continue to receive credit in your bank account from dividends. If there is a bonus issue, the shares get credited to your demat account.
Re-KYC process
To complete the re-KYC process, log into your broker’s account. Verify your KYC details, including address, name, and contact information. Then, submit your Foreign Account Tax Compliance Act (FATCA) declaration by selecting your income range and income source.
To access the futures & options (F&O) segment, you have to also disclose income proof. You can submit a six-month bank statement, Form 16, and income tax return acknowledgement, among other documents.
The next step is your video in-person verification (IPV). This can be done through a webcam or a mobile phone camera. You will be asked to write down a code on a piece of paper, display it on your camera, along with your face being visible. Some brokers may ask clients to answer standard questions asked by their executives. After a successful IPV, account reactivation typically takes 24-72 hours.
A couple of more steps are required if you need to update your address as mentioned in the Aadhaar ID. In this case, you will need to link your DigiLocker with the broker. Once done, the new address will show up in your KYC details. The next steps are similar — FATCA declaration and a video IPV.
As a last step, you would need to eSign your KYC with your Aadhaar. The reactivation of the broking account, along with the updated address, can take 24-72 hours.
“For seniors who aren’t tech-savvy, the re-KYC process can be a bit challenging. However, the relationship managers of brokers can assist and guide them,” said a broking official.
After reactivation, the next 24 months to determine client inactivity start from the last reactivation date.
If the mobile number is not linked to your Aadhaar, you must update the address offline. You can courier the KYC and account modification form, a self-attested copy of your PAN, along with a self-attested copy of your address proof — Aadhaar, passport, driver’s licence, voter ID, etc. — to the broker. You can also do this by visiting the nearest broker branch.
Keeping it active
Vishal Dhawan, founder and chief executive officer of Plan Ahead Wealth Advisors, says investors can make a small trade with a low-cost gold ETF or equity index ETF to keep the broking accounts active. Gold ETFs currently trade at ₹70-80 per unit as fund houses peg these ETFs to 0.01 gram of gold. Several Nifty 50 Index ETFs trade around ₹250-270 as the fund houses have pegged the unit size to 1/100th of the Nifty 50 Index.
“While re-KYC can be a friction point, it is now widely required. Banks, too, require it at regular intervals if there is no activity in the account. It is better to just place a small trade with the broker to avoid the hassle. The good part is that re-KYC can be done online in most cases. Exceptions to online KYC are Hindu Undivided Family (HUF) accounts, partnerships and corporate accounts. These have to be done offline and can be tedious,” pointed out Kavitha Menon, founder of Probitus Wealth.
Rules prevent brokers from sending alerts to clients asking them to make a trade to prevent the account from going dormant. Hence, clients need to monitor their own activity.
“Advisors can encourage clients to keep the account active by doing a small SIP,” said Dilshad Billimoria, founder of Dilzer Consultants.
