Did you know that you have been paying a fees apart from brokerage charges and it does not reflect in contract notes as well as brokerage ? Yes its true and that charge is known as DP charges. In this post you will learn everything you need to know about DP charges along with the amount charged by various brokers in the Indian Stock Market. So lets get started.
The full form of DP charges is Depository Participant (DP) charges. A depository is an institution which holds securities with it, in which trading is done with shares, debentures, mutual funds, derivatives, F&O, and commodities. The mediators perform their actions in a variety of securities at Depository on behalf of their clients. These intermediaries are known as Depository Participants. Essentially, There are only two depositories in India. One is the Central Depository Service (India) Limited (CDSL) and the other one is the National Securities Depository Limited (NSDL). Each Depository Participant (DP) needs to be registered under either of these depositories before it commences its operation.
Now you might be thinking that who all can be depository participants. So here is the list :
- Public financial institutions,
- foreign banks,
- scheduled commercial banks operating in India with the approval of the RBI,
- stock brokers like Zerodha etc
- State Financial Corporations
- Registrar to an issue or share transfer agent complying with the requirements prescribed by SEBI can be registered as DP
Just like you avail banking services from the bank branch, depository services such as Dematerialisation, Rematerialisation etc can be availed through a DP. You cannot directly go to a depository to open a demat account, it needs to be done through a depository participant. Depository Participants are agents of the depository through which it interacts with the investor and provides depository services.
What is DP charges ?
Now that you have understood what is depository and depository participant, lets see what is DP charges ?
Depository Participant (DP) charges are the charges levied by a stock broker which is a depository participant and the depository when you sell a stock. Simply because, it does not display as brokerage or contract note, it often goes unnoticed. The fees collected from a broker is an additional income above and beyond brokerage charges.
Example: Assume that you own some stock and you sell it through your stock broker with whom you have a demat account. Apart from brokerage charges, you will be levied DP charges of (₹4.5 for NSDL or ₹5.5 for CDSL) + Debit charges levied by the stock broker. DP charge is calculated in this way. These charges vary from broker to broker.
DP charges are a flat transaction fee levied on the sell side of delivery trades irrespective of the quantity you sold. So the fee levied is per scrip and not the number of shares sold. So the DP charge will be the same whether you sell 1 share of XYZ company or 1000 shares of the same company. ( This is regarding the fees charged by CDSL / NDSL, some brokers do levy debit charges based on the number of stocks you hold )
Why are DP charges charged ?
As you learned earlier that to provide demat account to clients each broker must become a depository participant. All these depository participants need to pay a membership fee to CDSL or NDSL which goes in lakhs along with various other fixed costs and also advanced prepaid transaction charges. As expected the brokers pass on these charges to their customers by adding an additional fee to recover these expenses.
How to avoid DP charges ?
This is a common question of many traders and investors. You cannot avoid DP charges in delivery trades however there are three ways by which you can avoid DP charges :
- By closing your position intraday.
- By taking BTST trade.
- By trading in the futures segment.
DP charge of (₹4.5 for NSDL or ₹5.5 for CDSL) + Debit charges levied by the stock broker
DP charges – ICICI
NDSL – Rs 4.5
ICICIDirect – Rs 0
So the total DP charge with ICICIDirect is Rs 4.5 per scrip
DP charges – Zerodha
CDSL – Rs 5.5
Zerodha – Rs 8
So the total DP charge with Zerodha is Rs 13.5 per scrip
DP charges – Kotak securities
NDSL – Rs 4.5
Kotak securities – 0.04% of the value of securities or Rs 27 whichever is higher
DP charges – Axis Bank
Consolidated DP charges by Axis Direct is the charges imposed on customers who are having an active demat & trading account.
CDSL – Rs 5.5
Sharekhan – Rs 0
Over to you !
Thats all for this post. Hope this clarified all your queries regarding DP charges and you learned everything you need to know about DP charges.
Are you satisfied by the DP charge levied by your broker ?
Have any other questions regarding DP charges ?
Feel free to comment below and all your queries will be answered.