What is DP Charges - How & Why DP Charges is Levied (2024)

A demat account is a mandatory prerequisite for trading in the Indian stock market. You cannot buy or sell shares through the primary or secondary market without a demat account. However, when you open a demat account, you are obligated to pay certain one-time and recurring fees known as DP charges. Wondering what they are? Here’s a comprehensive guide on what DP charges mean, their different components and who levies these charges.

To open such an account, you need to get in touch with a Depository Participant (DP). DPs are entities that are empowered by the depositories - NSDL and CDSL - to open demat accounts.

Although depositories like the NSDL and CDSL are the only two entities offering demat accounts in the country, you cannot open an account by approaching them directly. Instead, you need to get in touch with a depository participant (DP), which is an intermediary entity empowered to open demat accounts.

What are DP Charges?

DP charges, also known as depository participant charges, are the fees that demat account holders are required to pay to keep their accounts active. There are different kinds of DP charges, some are one-time while others are recurring in nature.

Who Levies DP Charges?

Now that you’re aware of the full form of DP charges, let’s take a look at who levies it. But before we go ahead, here’s a quick overview of how demat accounts are opened.

In India, there are two depositories - NSDL and CDSL. These two entities are the only ones offering demat accounts in the country. However, you cannot open an account with them directly. Instead, you would have to go through an intermediary entity known as the depository participant (DP). The DP is not only empowered to open demat accounts but also acts as the link between the account holder and the depository.

It is the depository participant who levies DP charges for the various services that they provide. Demat account opening charges, account maintenance charges (AMC), and transaction charges are a few of the fees that are commonly levied.

Why are DP Charges Levied?

The depository participant provides a host of services to demat account holders. The levy of DP charges makes up for the cost of providing these services and acts as a source of revenue for the participant. In addition to this, every DP is required to pay a membership fee to the depository they’re associated with. By charging these fees, they can recover a portion of this cost, if not entirely.

How Much DP Charges are Levied?

The depositories have given their participants the freedom to levy DP charges as they see fit. This means that the fees that you need to pay would depend primarily on the depository participant with whom you have a relationship. Here’s a table outlining the different DP charges levied by depository participants.

m.Stock's DP charges vs Industry

Unlike other depository participants, the DP charges levied by m.Stock is very nominal. Here’s a table comparing the fees charged by m.Stock with that of the industry.

Conclusion

As you can see, every depository participant levies DP charges. These charges are a crucial source of revenue for the participants and allow them to recover the various fixed and variable costs that they would have to bear. However, as an investor, it is important to ensure that you choose a depository participant, like m.stocks, that levies nominal fees. This way, you can reduce your out-of-pocket costs and protect your profit from taking a hit.