Skip to content

NISM-Series-VI: Depository Operations · Functions of Depository Participant - Account Operations

Modification and Closure of Demat Accounts for NISM

Updated 11 October 2026 · Fact-checked

Modification means changing a Beneficial Owner's (BO) details, such as address, bank details, signatory or PAN, after the account is open. The DP accepts a written request with proof and verifies it. Closure means the BO submits an account closure form, the account is cleared of holdings, and the DP closes it in the depository system.

Understand Modification and Closure of Demat Accounts

A demat account is opened with details given in the account opening form: name, address, PAN, bank account, signatures, nominee and so on. These details are recorded in the DP's records and in the depository's system. When a detail changes, the record must be changed too. Otherwise dividends, statements and instructions can go to the wrong place.

The Beneficial Owner (BO) starts every change. The BO submits a request to the Depository Participant (DP). The DP checks the request against the supporting proof, verifies the original documents or accepts properly attested copies, and then updates the records. The DP must not change anything on its own and must not act on a request it cannot verify.

Some changes need more care than others. A change of address or bank details needs fresh proof for the new details. A change of signature needs the new specimen signature, usually verified by the BO's banker or by the DP against the proof. Name and PAN changes need supporting documents. A change in a joint account needs the signatures of the holders as required by the account's operation rules. Always remember that the BO, not the DP, owns the request.

An account can also be restricted. A freeze stops debits, or all transactions, in an account or in particular securities. A BO may ask for a freeze, and a freeze can also be imposed on an order from a regulator or authority. Only the party who froze the account, or an authorised order, can lift it. A freeze is different from closure. The account still exists.

Closure is the end of the relationship. The BO applies on the prescribed closure form. The account should have no holdings, or the BO must give instructions to transfer them, for example to another account, before closure. Pending dues to the DP are settled. An account with a pledge, freeze or lien on it cannot just be closed. Once closed, the account cannot be reused. A new account needs a new opening.

Key formulas to remember

Who starts a modification
BO request in writing + proof → DP verifies → DP updates records
The DP never changes BO details on its own initiative.
Closure by the BO
BO submits closure request form → holdings cleared or transferred → dues settled → DP closes the account
The BO can close an account without giving reasons, but the account must first be free of holdings and blocks.
Closure of an account with balances
Transfer balances to another account (of the same BO) → then close
Securities cannot be left in a closed account.
Joint account closure
Closure request signed by all joint holders
One holder alone cannot close a joint account unless the operating instruction allows it.
Freeze versus closure
Freeze = restriction on the account; Closure = account ends
A frozen account still exists and can be unfrozen by the proper authority.
Change of details and proof
New address / bank / signature / PAN → supporting proof for the new detail
The request alone is not enough; the proof must match the change requested.

How to solve Modification and Closure of Demat Accounts questions

Most questions on this topic ask who acts, what proof is needed, or what must be done before closure. Use the same checks each time.

  1. 1Identify what is being asked: a modification (which detail), a freeze or unfreeze, or a closure.
  2. 2Ask who starts the action. In nearly every case it is the BO, with a written request.
  3. 3Ask what proof supports the change. New address needs address proof, new bank details need bank proof, new signature needs a specimen, PAN needs PAN proof.
  4. 4Check whether the account is joint. If so, look for the signatures of all holders.
  5. 5For closure, check what blocks it: remaining securities, pledge, freeze or unpaid dues.
  6. 6For freeze questions, find out who imposed it. Only that party or a competent order can lift it.
  7. 7Eliminate options that let the DP act without BO instruction or without verification.
  8. 8Pick the option that follows the correct order: request, verification, update or closure.

Quickest way: Request, proof, clearance

When to use it: Use this when you have under a minute for an MCQ on modifying or closing an account.

  1. Ask: who requests? It should be the BO (all holders if joint).
  2. Ask: what proof? It must match the detail being changed.
  3. For closure ask: is the account clear of balances, pledge, freeze and dues?
  4. Strike out any option where the DP acts alone or ignores the proof.
  5. Choose the option with the full sequence.

Common mistakes in Modification and Closure of Demat Accounts

  • Thinking the DP can update BO details on its own when it learns of a change.

    Students assume the DP maintains the records and so controls them.

    Fix: Remember the BO starts every change with a written request and proof. The DP only verifies and updates.

  • Treating freeze and closure as the same thing.

    Both stop the account from working normally.

    Fix: A freeze is a restriction and can be lifted. Closure ends the account permanently.

  • Believing one joint holder can close a joint account alone.

    Students think of the first holder as the owner.

    Fix: Closure needs the request of all joint holders, unless the operating instruction clearly says otherwise.

  • Closing an account while securities remain in it.

    Students forget that holdings are the BO's assets and must go somewhere.

    Fix: Transfer the securities to another account or demat them out first, then close.

  • Accepting a change request without proof for the new detail.

    A signed request feels like enough.

    Fix: Always match the proof to the change: address proof for address, bank proof for bank details, specimen for signature.

  • Assuming anyone can unfreeze an account.

    Students think the DP can simply reverse a freeze.

    Fix: Only the party who requested the freeze, or the authority that ordered it, can lift it through the proper process.

Worked examples

Example 1

A BO has moved to a new city and wants to change the address in the demat account. Which is the correct procedure?

A. The DP updates the address after seeing a newspaper report of the move
B. The BO submits a written request with valid proof of the new address, and the DP verifies and updates the record
C. The depository updates the address after the BO calls the helpline
D. The BO must close the account and open a new one

Show the solution
  1. Identify the action: a modification of BO details.
  2. Who starts it? The BO, with a written request.
  3. What proof is needed? Valid proof of the new address.
  4. Who updates? The DP, after verification.
  5. Test the options. A has no BO request. C has no written request or proof. D is unnecessary because modification is allowed.
  6. B contains request, proof, verification and update.

Answer: B

Example 2

A demat account is held jointly by two persons. They want to close it. The account holds some shares. What must happen?

A. One holder signs the closure form and the shares are cancelled
B. The DP closes the account after seven days without any request
C. Both holders sign the closure request and the shares are transferred to another account before closure
D. The shares stay in the account and the account is closed anyway

Show the solution
  1. Identify the action: closure of a joint account with holdings.
  2. Closure request: from all joint holders, unless the operating instruction says otherwise.
  3. Holdings: securities cannot be left in a closed account, so they must be transferred first or otherwise cleared.
  4. Test the options. A lets one holder act and cancels shares, which is wrong. B has the DP acting alone. D leaves shares in a closed account.
  5. C matches both conditions.

Answer: C

Exam tips

  • Look for the word 'BO' in the correct option. Most right answers have the BO starting the change.
  • For closure questions, check the account state first: balances, pledge, freeze and dues all matter.
  • Distinguish clearly between freeze and closure. Examiners use them as trap options.
  • In joint account questions, expect all-holder signatures to be the safe answer.
  • Because wrong answers carry a 25% negative mark, eliminate options where the DP acts alone before you guess.

Practice questions from Functions of Depository Participant - Account Operations

Modification and Closure of Demat Accounts: frequently asked questions

How do I change my address or bank details in a demat account?

Submit a written request to your DP with valid proof of the new address or bank details. The DP verifies the documents and then updates its records and the depository system.

Can a demat account be closed if it still has shares?

The securities must first be cleared. You can transfer them to another demat account, or dematerialised holdings can be dealt with as the BO instructs, and then the account can be closed.

What is the difference between freezing and closing a demat account?

A freeze restricts transactions, either debits or all activity, and can be lifted by the proper party or authority. Closure ends the account for good.

Who can unfreeze a demat account?

The party that asked for the freeze, or the authority that ordered it, can have it lifted. The DP does not decide this by itself.

Does a change of signatory need proof?

Yes. The DP needs the new specimen signature and the supporting verification as per its procedure, along with the BO's written request.