Over 27.5 lakh non-PAN demat accounts frozen

National Securities Depository Limited and Central Depository Services (India) Limited, India's two top depositories for securities, have frozen more than 27.5 lakh demat accounts after regulator Securities and Exchange Board of India made it mandatory for investors to submit permanent account number for trading in stock markets.

"Following Sebi's order on making PAN mandatory for operating demat accounts, we have frozen around 23 lakh demat accounts by June 23.

"These could be activated by investors only by providing necessary details about their PAN cards," a senior NSDL official told PTI.

In fact, almost every fourth demat account with NSDL and CDSL is now frozen. Investors were required to provide PAN card details for opening demat accounts from April 2006.

Even existing investors were asked to submit PAN details. The official, however, declined to disclose how many investors had opened multiple demat accounts by provide false information about PAN.

Sources said finance ministry had asked Sebi to take stringent steps in view of some recent frauds in stock market.

As on June 15, a total of 4.54 demat accounts were suspended, out of a total 25.49 accounts by the CDSL also. These included 1.67 lakh with balance amount and 2.87 lakh without any balance, official sources said.

Although the number of demat accounts with CDSL increased from 21.62 lakh as on December 31, 2006 to 25.49 lakh now, many of these were opened by account holders as benami accounts by providing false information.

The total number of demat accounts with NSDL has come down from 79.03 lakh as on March 31 this fiscal, to 77.77 lakh by June 23, while 54.66 lakh demat accounts were operational.

The Sebi decision has adversely affected trading in certain stocks, as the demat accounts of a large number of retail accounts have been frozen, sources said. In fact, over 25 per cent of the total demat accounts are currently frozen by
these two depositories.

Due to stringent norms imposed by the Sebi, the growth of demat accounts have slowed down and a number of investors have closed down accounts, sources said.

Ever since PAN was made compulsory, and know your client norms made stringent following unearthing of the IPO demat scam, a number of duplicate accounts have been closed as they did not have PAN cards.

Earlier a single investor used to have multiple accounts, sources said. Such practices are now being checked and consolidation is being witnessed in such accounts.