Yes opening a Demat account in India might be free with some brokers but not all. Apart from the opening charges, a Demat account is not completely free. You will have to pay an Annual Maintenance charge or Demat fee, every year.
What is a Demat Account and why is it needed?
A Demat account is an account that holds your securities like stocks, bonds, mutual funds, etc. In a similar way you keep money in your bank account, a Demat account is used to keep your shares safely. Without a Demat account, you cannot buy and sell shares or trade them.
Is Demat account free to open?
Most brokers do not impose an opening fee you from but it doesn’t mean you don’t have to pay the other charges. There are primarily two types of brokers, Discount Brokers, and Full-Service Brokers. Opening an account with a Discount broker is mostly inexpensive or sometimes free. On the other hand, Full-service brokers charge a higher fee, when compared to discount brokers. While opening an account there are mainly two types of charges which you have to pay, they are.
1. Account Opening charges: Most brokers do not charge any account opening charges, which means you can open an account for free. However, you might have to pay recurring charges like account Maintenance and Demat charges every year.
2. Annual Charges: As you have seen, some brokers do not take any account opening charges in the beginning but almost every broker charges an annual recurring fee in the form of Demat Charges and Annual Maintainence charges. These charges have to be paid by you no matter you use your account or not.
Conclusion
By now, you might have observed that although you can open a Demat account for free, it is not completely free altogether.
Some of the bank-based brokers charge even higher account opening fees and annual maintenance fees which make them quite expensive. Also, many brokers offer a demat account for free for the first year.
Therefore it is best to choose a good discount broker to pay the least amount of charges in the future. You also have to look for the brokerage structure of the brokers as discount brokers tend to charge a lower rate of brokerage on trades when compared to full-service or bank-based brokers.