The advent of the internet has revolutionized the way people earn and invest. The internet has made it more convenient and quicker for laypeople to create financial wealth. It achieves its financial goals by trading stocks and securities. Even people who are new to online trading can trade and minimize their risks by using best algo trading apps.
If you are new to online trading, you should know that you will require three accounts. It helps you trade on the stock market. The three accounts are interlinked and usually, when you register with a brokerage for a free trading account, it will come with a demat or dematerialization account. Then all that is remaining is to link your bank account to the trading account, and you can set to being an exciting journey in the world of trading stocks, shares, commodities, and other financial instruments.
The Three Most Important Accounts
There is a reason that the three accounts that you need for online trading. These all linked together. You need a trading account to buy and sell shares, securities, and other financial instruments. When you buy shares, the money gets debited from your bank account.
When you buy or sell financial securities and instruments, the details of those transactions are stored digitally in your trading account while the demat account maintains a digital record of the financial instruments you own or have sold.
According to SEBI regulations, you can have multiple demat and trading accounts. However, you cannot have them in the same brokerage house. Hence, you would have to open multiple trading and demat accounts in different brokerage houses. Many people do this to keep different shares and stocks separated based on their investment and financial goals. However, it is prudent to remember that you will incur a cost to maintain multiple trading account along with demat accounts. So, it is best to weigh the pros and cons.
As a new investor, it would be better to have one demat account and one trading account. However, you can use multiple bank accounts to fund your trading account. Many people do this, especially if they have money lying in their bank accounts and want to put it to better use rather than letting inflation devalue the money.
Linking Multiple Banks Accounts to Your Trading Account
According to the Securities and Exchange Board of India (SEBI) regulations, there are no restrictions when it comes to linking bank accounts to your trading accounts. However, different brokerage houses have their in-house rules. While some may allow traders to link three bank accounts, others may allow five or more. So, when you open a trading account, it is prudent to find out the number of bank accounts you can link.
While it is possible to map multiple bank accounts to your trading account, the first account that you link will be considered the primary bank account, and the subsequent bank accounts will be secondary bank accounts. Of course, you can change the primary bank account whenever you want.
Usually, it takes around 24 to 48 hours to change the primary bank account after you fill and submit the Trading Account Modification Request form. Remember, you would have to submit documentation to prove that the second account is legally your. For this purpose, the following documentation will be required:
- Canceled cheque
- Self-attested bank statement
- Self-attested passbook statement
You do not have to submit all three as proof; just one will suffice. If you are submitting your bank statement, it should clearly show your name, bank account number, MICR code, and IFSC.
The primary bank account is used to fund the trading account and to receive dividends. and all proceeds from selling shares and other financial securities. On the other hand, the mapped secondary bank accounts can use just to fund your trading account and not for withdrawals.
In Conclusion
So, now you know that you can link or map multiple bank accounts to your trading account. Get in touch with your brokerage house to find out how you should go ahead with this.