Higher charges need not mean better or more services

Though demat services offered by SBI and ICICI Bank are more or less similar, the former scores over ICICI Bank due to lower fees

Today, a demat account is almost as necessary as a savings bank account. It is essential if you want to invest in shares or non-convertible debentures or exchange-traded funds. In fact, most banks offer the facility to any new customer who opens a savings bank account.

So, even if you are a long-term investor and don't plan to trade in shares, you have to maintain a demat account, for which you would have to pay maintenance charges. And, if you are a regular trader, you would have to pay charges for transactions as well. If two or three members of the same family regularly trade in shares, the annual charges would be substantial.

A comparison of the demat account services offered by State Bank of India (SBI) and ICICI Bank shows these are similar. Both offer statements and bills through emails; an option to transact anywhere and anytime; a dedicated 24x7 customer care service; mobile alerts for all debits and credits, as well for requests that could not be processed; and online trading. (WHERE THE MONEY GOES)

However, a comparison of the charges shows SBI charges lower fees. For instance, SBI's annual maintenance charge is Rs 400 for physical statements and Rs 350 for email statements; ICICI Bank charges Rs 500 for physical statements and Rs 450 for email statements. In case of the charge for a 'sell' instruction, both charge at least Rs 30 for an instruction through a branch and Rs 10 for an email instruction. As percentage of transaction value, however, SBI's charge is 0.03, while it is 0.04 per cent in the case of ICICI Bank. This means if you put a 'sell' order of Rs 5,00,000 for SBI, you would have to pay Rs 150, but for ICICI Bank, you would have to pay Rs 200.

Also, ICICI Bank charges Rs 30 for a failed transaction or one that is rejected; SBI charges Rs 10 for these.

For an additional account statement, SBI charges Rs 30, while ICICI Bank charges Rs 20. In the case of rematerialisation, SBI charges Rs 25, while it is Rs 20 in the case of ICICI Bank.

These charges are important for passive traders, who record few transactions and tend to hold on to shares for longer periods, says Harsh Roongta, chief executive of Apnapaisa.com. For such traders, a very high holding value might be important.

For active traders, it is important to look at other charges such as brokerage fees and transaction charges, as well as the quality of service offered by the brokerage, as trading is time-driven. Also, check whether the broker is adding value or he/she is merely placing the 'buy' or 'sell' order for you.

"Demat is just one element. Customers need to look at the overall charges," says Roongta.