How to Protect Demat Account from Fraud?

The Indian stock market’s overall structure has been substantially altered by the switch to an electronic trading system. Demat Accounts are now required, which eliminates or significantly reduces the number of problems that were once connected to holding physical shares, including loss, stamp duty fees, theft, forgery, misplacement, and other bad features.

So, even though having a Demat Account is required to trade on the stock market, there are certain risks involved with the same. Here in this article we are going to cover those risks by discussing some rock solid measures.

Whether Demat Account Safe

In every area of a person’s life, safety is one of the top objectives. And when it comes to safeguarding your investments or financial resources, it becomes much more crucial. As a result, before entering the stock market and opening a Demat account, investors usually question its security.

A Depository Participant who opens an account for you is registered with one of the two depositories, and the NSE and BSE both support and regulate those depositories. Additionally, SEBI oversees the entire framework. This ensures the Demat account’s security and makes it easy for you to continue your stock market trading operations.

Ways to Protect Demat Accounts from frauds

There are various ways to protect demat accounts from frauds. Here we are going to discuss some of the ways.

  1. Protection of login details: One should use strong passwords and keep them safely stored. It’s best not to write them down anywhere and just remember them. It is also advisable to change them on a regular basis. Maintain vigilance and avoid storing your credentials in an unsecure location. It is best not to reveal your credentials on any social media network with anyone. To prevent utilizing public or hazardous networks, you should access your demat account from a secure network.
  2. Maintain the record of your transaction: Maintain a record of your account statements. What your bank account’s passbook is to your bank account, your Demat account’s DP holding and transaction statements are to your bank account. On a regular basis, a holding statement lists your shareholdings in various scrips in your Demat account. Keep your phone number and email address up to date at all times, and carefully review all statements and SMS messages sent to you by the depository. You should reconcile all transactions in your Demat account with your trading activity and report any discrepancies to the depository as soon as possible.
  3. Check Credibility of your broker: The number of brokerage firms grows in tandem with the popularity of stock trading among the general public. However, before opening a demat account, keep in mind that your brokerage firm must have a strong customer base, history, reputation, and credibility.
  4. Update your email ID and mobile: Your mobile phone number and email address are required to access your demat account. As a result, it is critical to update or add your mobile phone number and email address. Use an inactive mobile number or email address. Access to the mobile and email IDs associated with your demat account can be detrimental to your holding and even cost you money.
  5. Freeze Your Demat Account: People frequently travel abroad and neglect their Demat account. In these cases, you can give the DP a signed application to freeze the Demat account until you access or return it. When a Demat account is frozen, it continues to receive corporate actions such as dividends, bonuses, and splits but only debits to the barred Demat account. When your Demat account is likely to be idle for an extended period of time, you must use the freeze feature.
  6. Frauds related to Power of Attorney: A power of attorney (PoA) is a legal document that enables another person to carry out your instructions in accordance with its conditions. The PoA gives the online broker the legal right to make certain decisions regarding your account in the case of a demat account. The intensity of Demat related frauds are high in this case, however certain measures have been taken by the authority to make it completely safe for the users, As brokers need certain permissions before transferring funds or securities.

How are accounts Compromised?

  1. By Sharing Login Details: Users sharing their login information with others is the most typical way that trading accounts are compromised. We’ve observed situations where users share their login information with individuals posing as advisors in order to receive spectacular profits quickly, not just with us but with other brokers as well. 
  2. Phishing Attempts: Phishing attempts are also rather frequent. To obtain users’ login information, fake websites that look like broker login pages are made. We have consistently cautioned against taking such risks. 
  3. Weak Email service providers: Utilizing email service providers like Rediffmail that have inadequate security. These email services are prone to hacking because they frequently have ineffective spam filters, permit users to use simple passwords, and lack security measures to prevent unauthorized logins. Rediffmail users make up 80% of all incidents in which we’ve seen customers lose money, thus we’re stopping all Rediffmail accounts.


Demat accounts are nevertheless vulnerable to dangers, whether online or offline, such as fraud, misuse, hacking, etc., just like any other kind of financial or banking accounts. Various measures have been put in place by the regulator, stock exchanges, associated agencies, and Demat providers to make the entire value chain safe and friendly for investors. However, in the event of any mishap, the customer is the one who suffers the most.

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