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In April 2022, SEBI proposed an additional tool to support the pledging and repledging of shares for margin purposes. DDPI or demat debit and pledge instruction, has now replaced the option of Power of Attorney (PoA) to prevent the stockbrokers from misusing the PoA document handed by the users.
When it comes to managing your finances in the stock market, the DDPI is a crucial document for investors. In this article, we will understand DDPI and how you can submit it. Let’s get started.
What is DDPI?
DDPI’s full form is “demat debit and pledge instructions.” DDPI is a kind of authorisation that an investor gives to a DP to debit or pledge assets kept in their demat account.
This official instrument grants the broker, DP (depository participant), the authority to transfer shares. It is within the broker’s or DP’s authority to move assets from your demat account to the exchanges. When you use your trading account to place a sell order, this is what will happen.
Power of Attorney was the previous method of granting power before DDPI was issued.
Here’s what DDPI is used for:
- When a customer sells the stock, the shares kept in their demat account are transferred to the exchange.
- To satisfy a client’s margin requirements via the pledge or re-pledging of assets.
- When a customer takes part in tender offers, the shares are removed from the demat account.
- To make withdrawals from the demat account concerning the sale of mutual funds.
How can you submit DDPI or demat debit and pledge instructions online?
A DDPI request may be made using the respective broker’s website. Here are the steps you need to take when providing the DDPI form online to your broker or DP:
- Enter the credentials to open your trading or demat account. Most brokers enable customers to log into demat accounts using online trading platforms.
- Go to your profile and locate the “Submit DDPI” option.
- You may access the online form by clicking on the “Submit DDPI” section. Provide accurate information while completing the demat debit and pledge instruction document.
- Verify whether you are submitting the DDPI form with an e-stamp form. You need to complete the e-stamp form to comply with regulations.
- Make sure that both forms are e-signed after giving the necessary information.
- The broker may request information from your Aadhaar card. You might need to provide an OTP (one-time password) to verify your phone number.
- Following the verification of your mobile phone number, complete the DDPI application. The broker, or DP, will process your DDPI request within two to three business days.
DDPI in the share market
For stock market trading, the DDPI is quite helpful. At any time, the user wants brokers or DPs to sell shares from their demat accounts; there is no need to complete an OTP or engage in a T-PIN-based e-DIS procedure to sell shares.
All that is required of the demat account user is one sell order, which the broker will handle. The shares may be sold by the broker using DDPI. This means no further authentication is needed to sell equities on a customer’s behalf. With DDPI, the share sale procedure is now both simpler and safer.
An essential feature of margin trading is that DDPI allows brokers to use shares for pledging or re-pledging. This also applies to tender offers; brokers take care of everything for you. In the share market, it’s a win-win situation that guarantees quick transaction settlement and more safety.
What DDPI can do: Purpose of DDPI
Enhanced protection
The goal of DDPI is to improve the security of financial transactions. Using DDPI lowers the possibility of misuse or unapproved transactions by limiting the scope of authorisation to demat debit and pledge activities.
Integrity in financial dealings
With DDPI, debiting and pledging securities are more open and transparent. Investors are better able to keep track of these operations while comprehending the actions that they have approved.
Adherence to modifications in regulations
The move by SEBI to switch from POA to DDPI is in line with its mission to improve investor protection and maintain the transparency of the securities market. Investors who switch to DDPI will comply with the most recent legal mandates
Conclusion
To sum up, one of the most critical aspects of SEBI’s efforts to protect and improve the securities market system is the obligatory status of DDPI. To maintain adherence to the regulatory framework, shareholders, their brokers, and depository participants require DDPI.
FAQs
The benefits of DDIP include:
DDPI lets brokers debit and deliver securities when you sell shares.
There is no need to enter CDSL T-PIN or OTP with DDPI.
NSDL sends an SMS when securities are debited.
DDPI is considered safe as it limits the debiting of shares from your account only if you place a sell trade. You also get an SMS from NSDL when the securities are debited from your account as a risk mitigation measure.
A PoA (Power of Attorney) is a legal document that gives your broker the authority to act on your behalf in some issues related to your demat account. A PoA is used to debit and deliver securities from your account when you sell shares or pledge them for margin trading.
To activate DDPI, you need to download the DDPI document from your broker’s website, fill it out, and courier it to the broker’s address. The DDPI will be activated within 72 hours of receiving it, and you will get a confirmation email once it is processed.
To revoke DDPI, you need to write a letter to your broker requesting the cancellation of DDPI and send it to the broker’s address. You will also need to provide a copy of your PAN card and a cancelled check as proof of identity.
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