All encompassing demat could take at least a year

According to sources, the FSDC has set up an expert group to ready the groundwork for this ambitious project

The Union Budget proposal to have a single demat account for all financial market transactions could become a reality only after a year. 

According to sources, the Financial Stability and Development Council (FSDC) has set up an expert group to ready the groundwork for this ambitious project.

The Inter Regulatory Technical Group (IRTG), formulated by a sub-committee of the FSDC, has been mandated to study the feasibility and prepare the operational framework for moving to a single demat account regime.

Experts said the critical challenge would be to ensure interportability between various regulators, including market regulator Securities and Exchange Board of India (Sebi) and commodity market regulator Forward Markets Commission (FMC). IRTG has been tasked with the responsibility of ring-fencing investments under the jurisdictions of the various regulators. 

In its preliminary report, the expert panel has recommended a single demat account be implemented through a "regulated account aggregation facilities", wherein the investors will get consolidated information on financial assets.

"The point of contention currently is who would regulate the account aggregators. The responsibility might be handed over to Sebi, as they have the highest experience and expertise in handling demat accounts," said a source privy to the development.

Sources have indicated none of the regulators are forthcoming to be entrusted with the additional responsibility of becoming account aggregators.

"The idea of a single demat account needs to address the inter-operability of various asset classes that are held in unit form. If this aspect is ironed out, the transition will not be that difficult," said M S Sahoo, former whole-time member of Sebi.

Experts said although the idea looks simple on paper, implementation will be a logistical challenge. "It will be done in a phased manner and could take at least another year," said a source.

Currently, investors have to maintain separate accounts while dealing in shares, commodities, insurance and banking products. A single demat account will entail an investor to deal in all financial asset classes through one account.

"The idea of a single demat account is revolutionary and will benefit investors at large," said Sahoo. The idea for a single demat account was first conceptualised last year during one of FSDC's meeting. The IRTG is required to give its report in the coming weeks and will be tabled at the next meeting of the FSDC.

At present, IRTG is consulting various stakeholders and technology experts to prepare the draft regulations, to later be placed before the public for feedback.