Email Question: Unable to close Demat account because of locked in infrastructure bond

by Manshu on January 18, 2011

in Investments

I’ve got a couple of emails about this subject, so I thought I’d share it here, and see if anyone has any fresh ideas.

These readers bought the 80CCF infrastructure bond in the Demat form, which has been now allotted to them, and credited to their Demat account.

Now, these readers want to close their Demat account, and open one some place else, but they are being told that since the bonds are currently locked – in (these bonds have a lock in period of 5 years) they can’t transfer the bonds to another Demat account.

One way to deal with this situation is to rematerialize the bonds, and get the company to issue a physical certificate to them.

This can be done after the bond has been allotted, and you don’t have to wait for the lock – in period to expire to do this. After the bond has been rematerialized you can close the Demat account, and open a new one.

Does anyone have any other ideas on this, or any experience with the process of rematerialization?

{ 38 comments… read them below or add one }

Nikhil January 19, 2011 at 11:10 AM

WOW!!! These bonds are proving to be a lot of trouble it seems. I’m also in the same boat. Have the bonds in my RBS equity a/c and wanted to close that demat since they have a couple of issues like not offering few of the major IPOs, extra transaction charges etc, but it seems it would not be that straight forward.

Starting to regret the moment I enrolled for these bonds.

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Manshu January 20, 2011 at 7:53 AM

Sorry to hear that Nikhil – so what route are you going to go then? Rematerialize them? Is there any other option?

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Arpit March 24, 2011 at 11:42 AM

I am also facing with the same problem. I think only thing after reading reading your comments is to rematerialize the bonds, and get the company to issue a physical certificate.

But is there any one who has done so…how much time it will take to convert into physical certificate???

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Prashant Mahesh January 21, 2012 at 1:50 PM

I have rematted my bonds. It takes about 1-2 months. You have to chase both your DP and the issuing company IFCI ( in my case) to get it done. After rematting you can close the DP account.

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Zaheer January 31, 2011 at 3:03 AM

Recently RBI issued a directive wherein you can shift your mutual funds from one DP to another . Is this one of the alternatives that can be used . I also have ELSS funds and am planning to close the DP account if this is permissible.

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Manshu February 1, 2011 at 8:51 AM

So Zaheer – are your ELSS funds still in the lock in period? IF that’s the case then yes, you do have a very good point, and this might be a third alternative for sure.

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P Badala July 12, 2012 at 10:21 AM

Transfering the bonds/ securities from one DP to another DP in same name does not amount to change in ownership, I had my DP in HDFC bank and I was not satisfied with services wanted to close DP account, I opened new DP account in cosmos bank in same name as it was in HDFC bank and there is form available which you have to fill and submit to DP from where you have to transfer your holdings my case it is HDFC bank and entire holding got transfered to my new DPin cosmos bank and HDFC DP account got closed in and mind it there is no charges for this

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Kapil March 28, 2011 at 8:41 PM

Am also facing the same situation.
Have IFCI bonds in demat form in one of my dp.want to switch over to another dp.
Anyone tried the options listed above?
How much time it will take?

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Vijay Tyagi June 4, 2011 at 7:02 AM

I am also in same boat, check this link :

https://nsdl.co.in/services/remat.php

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Jitendra Kanzaria July 19, 2012 at 5:37 PM

Thanks for giving link

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Jitendra Kanzaria July 19, 2012 at 5:38 PM

Thanks for giving link
all please try following link

https://nsdl.co.in/services/remat.php

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Vivek June 4, 2011 at 11:55 AM

I am also facing same problem.

Already moved from old to new DP for stock trading, but not able to shift IFCI bonds. Loosing more (paying D’mat annual fee Rs 1250) than gaining from Bond interest. Old DP asking to discuss with IFCI. Really got stuck.

Will try to call IFCI at 011-41792800 / 41732000.

My request to all to keep on updating if anything positive comes-up.

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K Goel July 2, 2011 at 9:19 PM

I am facing the same problem. Vivek, did you got update from IFCI about anything on this?

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Prashant Mahesh July 19, 2011 at 2:40 PM

I am trying to close my hdfc demat account. i will fill up the remat form and ask IFCI for physical holding.

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ROHIT GARG December 2, 2011 at 10:21 AM

Also facing the same problem.

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K Goel December 2, 2011 at 4:51 PM

@Rohit: I could get the problem resolved by getting the forms in paper form. Submit request with your current DP for getting the bonds in physical form and then you will be free ๐Ÿ™‚

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Manshu December 3, 2011 at 2:01 AM

That’s great K – thanks for that input.

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rajeev sharma January 20, 2012 at 2:52 PM

same problem here with idfc bonds. But my dp idbi capital says that it is not permitted to rematerialise prior to locked in period. However you can freeze the account to get waiver from dp charges Till the bonds come up for redemption.

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Murali January 21, 2012 at 7:35 PM

Guys it’s not as complicated as you all are telling…you just need to fill a Remat application & hand it over to your DP..processing is done by them..you can view the status or your DP will be able to tell you over phone… you should be able to get in paper form to the address mentioned in your demat A/c..in not more than 2 months..then you can close the A/c

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Anand V Mahajan January 30, 2012 at 10:14 AM

Sir ! I want to close my demat account.Before closing the demat,I want to transfer shares to brothers account as I have borrowed some money from him.If I transfers all my shares to his demat account,will tax liability of my brother will increase(will it be treated as purchase of shares)?Please advice me.

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P Badala July 12, 2012 at 10:03 AM

You can gift the shares there will be no tax liability.

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atul singhal June 15, 2012 at 10:45 PM

i m also facing same problem.
these infrastructure bonds are compulsory in demat form and cannot be dematerialize.
therefore no solution exist at present time.

we have to pay demat annual maintenance charges of Rs.450 per year till the end of five year. which comes out to rs. 2250.
tax benefit on Rs.20000 @30% is Rs. 6000.
difference between market rate of interest and intt rate on bond is 4% (12.5%-8.5%).
loss due to low interest rate : Rs20000*4%*5year= 4000
therefore net loss is rs. 250.

after locking your money for 5 year you get net loss of Rs.250.

regards
atul
9718663223

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rajeev sharma June 16, 2012 at 5:12 PM

no need to incur any loss. write to ifci or the company in question and they will direct the depository to do remat . after this close the demat a/c.
it takes several weeks for the rematerealistion though. I have recently got the same done .
RAJIV

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Manshu June 18, 2012 at 12:40 AM

You don’t need the Demat account just for this, you can rematerialize your bond and have it in physical format as Rajeev has suggested.

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Vinod Rowmuria July 11, 2012 at 9:07 PM

Thanks Manshu and all for the topic and the solution – rematerializing of bonds. I am facing the same problem and this thread enriched my knowledge.
Thanks again. ๐Ÿ™‚

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P Badala July 12, 2012 at 10:00 AM

Transfering the bonds from one DP to another DP in same name does not amount to change in ownership, I had my DP in HDFC bank and I was not satisfied with services, I opened new DP account in cosmos bank in same name as it was in HDFC bank and there is form available which you have to fill and submit to DP from where you have to transfer your holdings my case it is HDFC bank and entire holding got transfered to my new DP in cosmos bank and mind it there is no charges for this.

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Arindam June 5, 2013 at 9:13 AM

I could successfully transfer locked in IDFC bonds from one Demat account to another and closed one demat account. Here is the process.

1] Apply for “transfer and close” of demat account you want to close in the specified form provided by the DP with the complete details of the target(new) account where you want to transfer all shares including “locked in shares”
2] Submit a stamped copy of “Client Master List” which is provided the target DP account along with the Closure form
3] The free shares will be transferred within a week
4] The locked in shares will be transferred only after an approval is obtained from the “Registrar and Transfer Agents” of the locked in shares. In my cases, the R&T agent was Karvy. The closing DP agency is supposed to apply for this permission. This is an internal process of the DP.
5] Get the contact names/mail ID of the R&T agents of the locked in shares and do some follow up with your details. I did 2 follow ups with Karvy (R&T agents for IDFC bonds)
6] The locked in shares get transferred in 2 months time.
7] As per NSDL rules, there will be NO CHARGES during the interim period and your old DP account will be in “Frozen” state. You will not be able to carry out any transaction in the old account as it is deemed as closed.
8] Once the shares get transferred to target DP account, the old DP account gets closed automatically. You may also verify the same by sending a mail to them.

Please note : For transfer of one DP to another DP, the accounts should be in the same names (if one is a single account and other is a joint account, it will not work). The PAN should also match.

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Amit July 9, 2013 at 2:40 PM

Thanks Arindam,

I have some queries related to point 2

From where can we get “โ€œClient Master List” and what’s the meaning of stamped copy. Also this needs to be submitted to whom?

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Sunil February 23, 2014 at 7:09 PM

Is the procedure for transfer of NCD Bonds also the same?
I am holding MUTHOOT FINANCE LIMITED NCD bond and the security name is MUTHOOT OP III 11.75% 01NV17. Can I transfer those NCD bonds online without rematerialiszing it from my ICICIDirect to Kotak securities account?

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Syed Ali Rashid June 17, 2014 at 3:48 PM

I’m not sure if my problem is related to this thread or a different one.

I have my demat account with ICICI and I had purchased few equity shares 5 years ago. Since I lost my interest in share market (no activities in the past 5 years), I tried to sell my equity shares but could sell only one company’s shares. I am unable to sell other company’s shares because they are not currently traded. I’m unable to reach the company PRO for any advice (no valid contacts). Because of this, I cannot close my Demat Account and I am being charged around Rs.500 every year. Can anyone suggest a way out, please?

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K Goel June 17, 2014 at 8:35 PM

Syed – I was in a similar situation as yours. I don’t think there is a way to materialize i.e. convert to paper form. You have two options: 1) Transfer the shares to a friend and 2) There are dealers in market who trade in non tradeable shares and would buy your shares. I followed the second option. Hope this helps !

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Syed Ali Rashid June 18, 2014 at 11:45 AM

Goel – Thanks for your suggestion. How can I reach the dealers in market who trade these shares?

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K Goel June 18, 2014 at 4:25 PM

Weblink for some of the dealers are below. You can call each and confirm the rate and process. I worked with Abhishek Securities and had a very good experience. For others you can google for ‘Dealers in Unlisted Shares’ and you will get a list of such websites.


http://kajariasecurities.com/?p=12
http://3aindia.com/

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dipti September 28, 2015 at 2:16 PM

hey friends,

You don’t need to rematerialize the Lock in Securities like Bonds to close your current demat account. Simply go to your DP and request them to close your demat and transfer to your another new DP account. All your existing securities will get transfer including your lock in securities like Infrastructure Bonds. Transfer Charges are Nil if your completely close DP account and transfer your all securities to new one. Only the thing is you have to fill up the form for the same mentioning your new DP details.
For transferring Lock in securities DP has to process your request to RTA of that particular Lock in securities and relevant Authorities (CDSL, NSDL etc.) and it will automatically transfer it after required procedure.
This required some more days than all other un-locked securities.
See SEBI Master Circular April 7, 2014 on sebi website.

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Pankaj Khater November 17, 2015 at 3:37 PM

Guys, there is an option where if your holding in a demat account is less than 50,000, the Annual Maintenance Charge will be Zero, Please use this option instead of going through the hassle of rematerializing if you have no interest in trading etc as many responses suggest. I did the same in my demat account and it is a Govt rule recently introduced

We refer to the Basic Services Demat Account (BSDA) facility applied by you and would like to inform you that as per your application, your Demat Account has been converted to BSDA scheme.

Incase, the holding in your Demat account is up to Rs. 50,000, you will not be charged any Annual Maintenance Charge (AMC). If your holding is from Rs. 50,001 to Rs. 2 lac, you will be charged Rs. 100 as AMC.

However, please note that as and when the value of holding increases above Rs. 2 lac, you will be charged AMC as per a regular account.

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Pankaj Khater November 17, 2015 at 3:40 PM

Also guys, I have the opposite problem, I want to Demat my IFCI infra bonds . This is because once STT is paid, one can avail benefits of Long term Capital Gains with Indexation benefits ( Indexation is not available if it is held in Physical form)

Are you guys aware whether the Physical Infra Bonds (IFCI) can be converted to Demat

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pankaj jain February 7, 2016 at 11:01 AM

MERA DEMATE ACCOUNT ANGLE BROKING MAY HAE OR MUJHE DEMATE CLOSE KARNA HEAY OR KYA BINA CDSL DEMATE CLOSE KIYE SIRF DP CLOSE KARNE PAR KISI DUSRE DP MAY MERA CDSL DEMATE ACCOUNT TRANSFER HOGA YA NAHI

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vicky September 19, 2016 at 8:17 PM

I found this website buysellunlistedshares.com
They have a wide list of highly profitable unlisted shares.

Reply

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