What is Demat Debit and Pledge Instruction (DDPI)| Meaning and Purpose

In the fast-paced world of trading and investing, managing your demat account is crucial. Yet, many investors face hurdles when it comes to authorising transactions. Demat Debit and Pledge Instruction (DDPI) – is the streamlined solution. Introduced by SEBI in 2022, it aims to simplify the process of security transfers. 

What is a DDPI authorisation facility?

Let us understand it!

What is the DDPI (Demat Debit and Pledge Instruction) Facility?

DDPI is an authorisation mechanism for investors using dematerialised (demat) accounts.

DDPI Meaning

DDPI, which stands for Demat Debit and Pledge Instruction, is like a permission slip in the Indian stock market. DDPI authorisation grants brokers the authority to debit or pledge securities held in your Demat account as per specified instructions. It’s a simple document that allows your stockbroker to transfer your shares.

1. First, it lets them sell your shares from your Demat account whenever you want them to, without needing extra codes or passwords from you.
2. Second, it allows them to use your shares as collateral for trading if you want to do that. So, in a nutshell, DDPI makes it easier and safer for you to buy and sell stocks in the Indian stock market.

It specifies the right to debit or pledge securities from their demat account.

DDPI replaces the Power of Attorney (POA) that investors previously gave to brokers.

This change aims to enhance the safety and transparency of transactions involving securities.

Reasons for Introducing DDPI

Demat Debit and Pledge Instruction (DDPI) was introduced in India to empower investors and enhance the safety of demat accounts.

Here are the reasons for preferring DDPI over POA:

You can e-sign and submit DDPI forms online. Thus avoiding the need to submit POA forms offline.

Brokers and DPs can e-stamp DDPI forms. This helps in reducing the manual work required for physically stamping POAs.

DDPI minimises the risk of unauthorised transactions, unlike POAs that have been misused.

Online submission and stamping of DDPI forms reduce paperwork. Thus making it easier for investors to a open demat account.

Introduction of DDPI by SEBI

SEBI introduced the DDPI Facility in the circular released in 2022.

The SEBI circular regarding Demat Debit and Pledge Instruction (DDPI) highlights:

1. Stockbrokers or DPs should not insist on a Power of Attorney (PoA) when opening client accounts.
2. PoA, when executed, enables the broker or dp to access the client’s Beneficial Owner (BO) account. This is for specific purposes related to trade settlements and margin requirements.
3. DDPI serves the same purpose as PoA but with certain limits. This limits to settlement obligations and pledging or re-pledging of securities.
4. The circular clarifies that clients retain the validity of existing PoAs until they revoke them. Furthermore, institutions should not insist on PoAs when opening client accounts.
5. Credit of the securities transferred based on DDPI to the client’s trading member pool account.

DDPI- Demat Debit and Pledge Instruction in Stock Market

DDPI plays a vital role in stock market transactions. It empowers brokers or DPs to execute share sales directly from Demat accounts upon user request.

Users no longer need to go through the hassle of OTPs or T-PIN-based e-DIS procedures to sell shares.

Instead, they simply need to place a sell order, and the broker takes care of the transaction.

This makes the selling process quicker and more secure, enhancing the overall trading experience.

Moreover, DDPI enables brokers to utilise shares for pledging or re-pledging, a critical aspect of margin trading.

Additionally, it facilitates tender offers, with brokers managing the entire process on behalf of the user.

• When you sell shares, DDPI allows the broker to transfer those shares from your demat account to the exchange.
• It enables the pledging or re-pledging of securities to meet margin requirements for trading.
• Upon the sale of mutual fund units, DDPI authorises the broker to debit them from your demat account.
• It allows the broker to tender or sell shares in open offers. This includes buybacks, delisting, or acquisitions through stock exchange platforms.

Advantages of DDPI

Demat Debit and Pledge Instruction (DDPI) helps make trading smoother and safer for everyone involved.

DDPI authorisation saves time and effort compared to the physical stamping required for POA.

Investors can submit Demat Debit and Pledge Instruction as part of the account opening process. You can do it separately if you already have a demat account.

How to Submit DDPI 

Now that you have understood the DDPI meaning, let us discuss how to submit it.

You can submit your Demat Debit and Pledge Instruction (DDPI) on Shoonya by following these steps:

1. Download the DDPI Form: You can download it directly from here.
2. Fill Out the Form: Print the downloaded form and fill in all the required details accurately.
3. Confirmation: After filling out the form, you can mail it to: [email protected] 
4. Courier the Form: Once you have received confirmation, you must share your DDPI Shoonya form at the following address:
   

Address: Finvasia Centre, D 179, Industrial Area, Sector 74, Sahibzada Ajit Singh Nagar, Punjab 160055

DDPI Charges

To enable Demat Debit and Pledge Instruction (DDPI), you must pay a minimal fee of ₹ 100. This fee is usually a one-time charge, which varies by broker. This amount is directly deducted from your trading account.

Difference between DDPI and POA

Now, you may wonder how DDPI is different from POA.

DDPI (Demat Debit and Pledge Instruction) and POA (Power of Attorney) may sound similar as they both relate to authorising transactions in a demat account. However, they serve different purposes and have distinct features.

Let us see!

• POA: It is a broader authorization that allows brokers to debit shares from a client’s demat account.

It can be for various reasons, including transactions not directly related to the sale of securities.

• DDPI: This special permission. It helps make sure the broker can only take shares for certain things.

This may include completing trades, meeting margin needs, handling mutual funds on stock exchange sites, etc.

DDPI can be electronically signed, whereas POA requires physical stamping and signing

Is DDPI Compulsory| Understanding DDPI and Investor Options in 2024

As per the SEBI circular dated October 06, 2022, DDPI (Demat Debit and Pledge Instruction) is compulsory for specific purposes.

It is required for :

• Transfer of securities towards Stock Exchange related deliveries/settlement obligations
• Pledging/re-pledging of securities
• Mutual Fund transactions executed on Stock Exchange order entry platforms
• Tendering shares in open offers through Stock Exchange platforms.

Is DDPI Safe?

Yes, DDPI is a secure method regulated by SEBI and Indian depositories. It controls share debits to your account only during sell trades. Compared to the old POA system, DDPI offers enhanced security, reducing unauthorised debits and fraud risks.

Conclusion

While Demat Debit and Pledge Instruction offers convenience, investors must understand certain things. Once the DDPI facility activates, the broker can debit shares for obligations arising from sell orders. However, it is optional. You can use alternatives like the CDSL TPIN to authorise transactions.

FAQs| What is DDPI

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Disclaimer: Investments in the securities market are subject to market risks; read all the related documents carefully before investing.