You can open more than one demat account as long as you open them with separate depository participants. It is completely legal to own multiple demat accounts but you cannot have more than one account with a stockbroker.
Why is a Demat account required?
A demat account is required to transact in shares, bonds, mutual funds, etc. In order to buy and sell any digital securities, you will require a demat and trading account. A Demat account is also used to buy and hold shares for the long term as a long-term investment.
Can you open more than 1 Demat accounts?
The answer is yes. You can open two or more demat accounts as long as the stockbroker or the depository participant (DP) is different. This means that you cannot open more than one demat account with a single stockbroker. There are some more regulations that you will have to follow while opening your account. Your PAN Card (Permanent Account Number) is a mandatory document required at the time of account opening.
As per SEBI, you can open multiple demat accounts but you will have to incur the additional maintenance charges of the Demat accounts.
Benefits of having 2 or more Demat accounts
Having two or more demat accounts can be beneficial in some cases.
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You can diversify your portfolio into different asset classes using different demat accounts. You can additionally use a specific account for a certain purpose. For example, you can use one account only for trading whereas you can employ the other as investments. In this way, you can separate your requirements into various accounts and use them accordingly.
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You can moreover have a demat account with a full-service broker and receive research reports and also other facilities offered by them.
Limitation of having multiple accounts
Having more than one demat account has some negatives as well.
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Multiple accounts may cost a lot of money depending on your broker and types of uses. For small investors, having more than 2 accounts may not be feasible in the long run.
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You will also have to stay active in all of your accounts to prevent freezing of the account. This can be time-consuming for passive investors who don’t use their accounts much.