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. DDPI – Demat Debit and Pledge Instruction – is the streamlined solution. Introduced by SEBI in 2022, it aims to simplify the process of security transfers.
What is a DDPI facility?
Let us understand it!
What is the DDPI (Demat Debit and Pledge Instruction) Facility?
It 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. It’s a simple document that allows your stockbroker to transfer your shares.
- First, it lets them sell your shares from your Demat account whenever you want them to, without needing extra codes or passwords from you.
- Second, it allows them to use your shares as collateral for trading if you want to do that.
So, in a nutshell, it 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.
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 highlights:
- Stockbrokers or DP should not insist on Power of Attorney (PoA) for opening client accounts.
- 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.
- Demat Debit and Pledge Instruction serves the same purpose as PoA but with certain limits. These limits apply to settlement obligations and the pledging or re-pledging of securities.
- The circular clarifies that clients retain the validity of existing PoAs until they revoke them. Furthermore, institutions should not insist on PoAs for opening client accounts.
- Credit of the securities transferred based on DDPI to the client’s trading member pool account.
Difference between DDPI and POA
• 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.
Demat Debit and Pledge Instruction can be electronically signed, whereas POA requires physical stamping and signing
What is DDPI- Demat Debit and Pledge Instruction in Stock Market
Demat Debit and Pledge Instruction 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 utilize 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, Demat Debit and Pledge Instruction authorize 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 helps make trading smoother and safer for everyone involved.
DDPI authorization saves time and effort compared to the physical stamping required for POA.
Investors can submit it as part of the account opening process. You can do it separately if you already have a demat account.
Conclusion
While DDPI offers convenience, it’s essential for investors to understand certain things. Once Demat Debit and Pledge Instruction facility activates, the broker can debit shares for obligations arising from sell orders. It’s optional. You can use alternatives like the CDSL TPIN to authorize transactions.
FAQs | What is Demat Debit and Pledge Instruction
DDPI stands for Demat Debit and Pledge Instruction. DDPI autorisation allows brokers to debit securities from a client’s demat account for specific purposes.
No, submitting DDPI is optional. Clients can use alternatives like the CDSL TPIN to authorise transactions.
The main difference is that DDPI includes specific transactions related to stock sales and pledges. But, PoA is broader and grants authority to act on behalf of a client across various financial matters,
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Disclaimer: Investments in the securities market are subject to market risks; read all the related documents carefully before investing.