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

Nomination, Power of Attorney and Account Modification in a Demat Account

Updated 11 October 2026 · Fact-checked

Nomination lets a demat holder name who receives securities after death. A power of attorney (POA) lets another person operate the account while the holder is alive. Changes in address, bank or signatory need a request with proof to the DP. Closure needs a request and nil balance or transfer. Know who acts, and when.

Understand Nomination, Power of Attorney and Account Modification

A demat account is held by a Beneficial Owner (BO) through a Depository Participant (DP). Over time the BO's life changes. The BO may die, travel, move house, change banks or want to close the account. This topic covers how the system handles each of these.

Nomination is for the time after the holder's death. The holder names a person (the nominee) who can claim the securities. The nominee has no rights while the holder is alive. A nominee is not the same as a legal heir, and nomination does not replace a will. It makes transmission easier. Nomination is made through the DP, and the holder can change or cancel it. Under SEBI's rules, account opening now asks the holder to either nominate or formally opt out of nomination. Check the latest NISM workbook for the exact form and consequences.

Power of Attorney (POA) is for the time the holder is alive. The BO authorises another person, such as the DP, a broker or a relative, to operate the account. The POA holder acts on behalf of the BO under the terms of the document. The authority ends when the BO revokes it. Death of the BO also ends a POA in general law. The DP must keep a copy of the POA and verify the person who acts under it. Being the DP does not give any automatic right to operate. The BO must grant it in writing.

Modification covers changes to BO details: address, bank account, signatory, nominee, contact details. The BO submits a request with proof, and the DP verifies it against original documents or e-verification before updating. Records at the depository are then updated. A closure request is made by the BO on a prescribed form. The DP closes the account once no balance remains or the balance is moved. The DP cannot refuse closure just because of its own commercial interest. Always check the workbook for any stated timelines and fees.

Key formulas to remember

Nominee vs POA
Nominee = rights after death of holder | POA holder = acts during life of holder
The most tested distinction. A nominee has no power to operate the account while the holder is alive.
Who can grant a POA
Only the BO (account holder) can grant a POA
The DP cannot create its own authority. It must be given in writing by the BO.
Change in BO details
Written request + supporting proof + DP verification → update in records
Applies to address, bank details and signatory changes. The DP does not update on a verbal request.
Closure of account
Closure request by BO → nil balance or balance transferred → DP closes
Balance must be dealt with before the account is closed.
Nomination can be changed
BO may add, change or cancel a nomination at any time while alive
A fresh nomination replaces the earlier one.

How to solve Nomination, Power of Attorney and Account Modification questions

Most questions on this topic test who has authority, in what situation, and what the DP must do. Use this order.

  1. 1Read the question and mark the time frame: is the holder alive or deceased? This separates POA from nomination.
  2. 2Identify the party named: BO, nominee, POA holder, DP or depository.
  3. 3Match the request type: nomination, POA, change of detail, or closure.
  4. 4Recall the basic rule for that type, such as written request, proof, verification, or nil balance.
  5. 5Check who has authority: only the BO can nominate, grant a POA, modify details or close the account.
  6. 6Eliminate options that give rights to a nominee during the holder's life, or that let the DP act without authority.
  7. 7Choose the option that follows the stated rule exactly, and watch words like always, only and must.

Quickest way: Alive or dead test

When to use it: Use when an option mixes nominee and POA, or asks who can operate the account.

  1. Ask: is the holder alive? If yes, only the BO or a POA holder can act.
  2. If the holder has died, think nominee, legal heir and transmission, not POA.
  3. For changes in details, think written request, proof and DP verification.
  4. For closure, think request from BO, then nil balance or transfer.
  5. Reject any option where the DP acts on its own without BO's written authority.

Common mistakes in Nomination, Power of Attorney and Account Modification

  • Saying a nominee can operate the account during the holder's life.

    The word nominee sounds like a representative.

    Fix: A nominee gets rights only after the holder's death. Use the alive or dead test.

  • Treating nomination as a replacement for a will.

    Both deal with what happens after death.

    Fix: Nomination eases claiming of securities. It does not decide ownership against a valid will or legal heirs.

  • Assuming the DP automatically holds a POA.

    DPs handle many operations, so students assume they can act freely.

    Fix: A POA exists only if the BO grants it in writing. Without it, the DP cannot operate the account.

  • Thinking a POA continues after the BO's death.

    Students link POA to the account instead of the person.

    Fix: A POA is the BO's authority. After death, the process moves to transmission.

  • Believing an address or bank change can be made on a phone call.

    Real-life apps make changes feel instant.

    Fix: For exam answers, a request with supporting proof and DP verification is required.

  • Closing an account without dealing with the balance.

    Students focus on the request form only.

    Fix: Remember that securities must be nil or moved to another account before closure.

Worked examples

Example 1

Mr. Rao has a demat account and has named his daughter as nominee. He is alive and travelling abroad. His daughter asks the DP to sell his shares. What should the DP do?

A. Allow the sale because she is the nominee
B. Refuse, as a nominee has no right to operate while the holder is alive
C. Allow the sale if she gives her PAN
D. Close the account and pay her

Show the solution
  1. Time frame: Mr. Rao is alive.
  2. The daughter is only a nominee, whose rights arise after the holder's death.
  3. No POA is mentioned, so she has no authority to operate the account.
  4. Options A and C wrongly give a nominee power during life. Option D has no basis.
  5. So the DP must refuse.

Answer: B. A nominee has no right to operate the account while the holder is alive. Only the BO or a POA holder can act.

Example 2

Which statement about changing the bank details in a demat account is correct?

A. The DP may update on a verbal request from the BO
B. The BO must submit a request with supporting proof, and the DP verifies it before updating
C. Only the depository can request the change
D. Bank details can be changed only by closing the account

Show the solution
  1. Recall the rule: changes in BO details need a request and proof.
  2. The DP must verify, so A fails.
  3. The BO makes the request, not the depository, so C fails.
  4. Closure is not needed for a change in details, so D fails.
  5. B matches the rule.

Answer: B. The BO submits a request with proof, and the DP verifies before updating the records.

Exam tips

  • Almost every question here turns on one distinction: nominee after death, POA during life. Practise spotting it.
  • Watch absolute words such as always, only and automatically. They often mark a wrong option.
  • Remember that only the BO can nominate, grant a POA, change details or request closure.
  • Check the latest NISM workbook for exact forms, fees and timelines. Do not guess numbers.
  • In negative-marking papers, skip a question only if you cannot eliminate at least one option.

Practice questions from Functions of Depository Participant - Account Opening

Nomination, Power of Attorney and Account Modification: frequently asked questions

What is the difference between a nominee and a power of attorney holder in a demat account?

A nominee is named to receive the securities after the holder's death. A POA holder is authorised to operate the account while the holder is alive. The two roles apply at different times.

Can the DP operate my demat account using a power of attorney?

Only if you grant it in writing. The DP has no automatic right to operate your account. You can revoke the POA when you wish.

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

You submit a request to your DP with supporting proof. The DP verifies it and updates the records. Do this in the way your DP and the NISM workbook describe.

How is a demat account closed?

The BO makes a closure request to the DP. The account should have no securities, or they must be moved to another account. The DP then closes it and updates the depository records.