In a recent social media post on platform X, Nithin Kamath, the CEO of online brokerage firm Zerodha, described the depository participant (DP) fees that businesses charge stock market participants when they sell their shares.
According to Nithin Kamath, the Depository Participant (DP) is in charge of clearing the trade settlement each time an investor or trader sells their holdings. This includes debiting the shares from the demat account and delivering them to a clearing organization.
When you sell equities, the clearing organization receives your shares for settlement after deducting them from your demat account. According to Kamath’s post, this debit is what results in a DP (Depository Participant) charge.
Depository participant (DP) charges: what are they?
Banks, financial institutions, and other SEBI-registered organizations that act as a middleman between the depository and Indian investors are known as depository participants (DPs).
Data from Bajaj Finance indicates that DPs provide services including holding and electronic securities transactions to enable smooth and effective trading and settlement of securities.
Nithin Kamath clarified in his article on X that while some brokerage firms charge a portion of the selling value of the stocks, the majority charge investors a fixed depository participant (DP) fee.
As an illustration, Kamath stated that a 0.04% DP charge on a ₹10 lakh stock sale through a brokerage firm would be ₹400. He emphasized that it is illogical for an investor to have a high DP charge and a low brokerage charge.
What should be on the lookout for investors?
The head of Zerodha also advised stock market participants to be wary of brokerage houses that impose DP costs on each sale. He gave the example that if a person sells a firm share four times in a single day, they will always be charged the cost.
Another issue to keep an eye on is that certain brokers impose DP fees on each sale. You paid four times if you sell Reliance four times in a day. No matter how many times you sell a stock, Zerodha charges DP fees once every day, according to Nithin Kamath.
Kamath pointed out that Zerodha charges customers utilizing its online broking platform ₹13.5 + GST each transaction, which includes a ₹3.5 depository cost.
Most individuals miss DP charges since they do not appear like brokerage charges do. It is worthwhile to verify the real amount you are paying. “All of these things build up,” Kamath remarked. This fee, which is assessed to the depository members, is paired with an additional fee imposed by the brokerage.
