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?

{ 26 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 🙂

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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. 🙂

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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.

Reply

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