What Is Ledger Balance in Demat Account

Last Updated on February 2, 2024 by ethinos

A demat account is a type of account that allows investors to hold their securities, such as shares, bonds, mutual funds, etc., in an electronic or dematerialized form. A demat account eliminates the need for physical certificates and reduces the risk of theft, loss, or damage of securities. A demat account also facilitates faster and easier transactions, as well as lower costs and taxes. A demat account is opened with a depository participant (DP), which is an intermediary between the investor and the depository. The depository is an institution that holds the securities of the investors in electronic form. There are two depositories in India: National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL). Let us get aware of Ledger Balance in Demat Account in this article.

What Is Ledger Balance In Demat Account

A demat account has two types of balances: securities balance and ledger balance. The securities balance shows the number and value of securities held by the investor in the demat account. The ledger balance shows the amount of money available in the demat account for buying or selling securities.

The ledger balance in a demat account is calculated at the end of each business day by the DP. It reflects the inflow and outflow of cash in the demat account due to various transactions, such as:

• Transfer of funds from or to a linked bank account
• Receipt or payment of dividends, interest, or other income from securities
• Purchase or sale of securities
• Charges or fees levied by the DP or depository
• Any other adjustment or correction

Negative Ledger Balance In Demat Account

The ledger balance can be positive, negative, or zero. A positive means that the investor has surplus funds in the demat account that can be used for buying securities or transferred to a bank account. A negative ledger balance in demat account means that the investor has a deficit in the demat account that needs to be covered by depositing funds from a bank account or selling securities. A zero ledger balance means that the investor has no funds in the demat account.

Factors That Determine Ledger Balance in a Demat Account

The ledger balance in a demat account is different from the available balance or margin balance. The available balance is the amount of money that the investor can use for trading on a given day. The available balance may be higher or lower than the ledger balance, depending on factors such as:

• The trading limit or exposure granted by the DP or broker
• The margin requirement or haircut applied by the DP or broker
• The collateral value or margin benefit offered by the DP or broker
• The settlement cycle or pay-in and pay-out dates of securities

The margin balance is the amount of money that the investor has to maintain as a security deposit with the DP or broker for availing margin trading facility. Margin trading allows investors to buy or sell securities by paying only a fraction of the total value, while borrowing the rest from the DP or broker. Margin trading enables investors to leverage their capital and increase their returns, but also involves higher risk and interest cost.

How Ledger Balance Helps Investors

The ledger balance is important for investors to keep track of their cash position and financial transactions. The ledger balance helps investors to:

• Plan their investment strategy and budget
• Monitor their income and expenses from securities
• Manage their cash flow and liquidity
• Avoid overdraft or penalty charges
• Comply with regulatory and tax obligations

Ways to Access

The ledger balance in a demat account can be accessed by investors through various modes, such as:

• Online portal or mobile app of the DP or broker
• Email or SMS alerts from the DP or broker
• Physical or electronic statement from the DP or broker
• Customer care service of the DP or broker

The ledger balance can also be verified by investors by reconciling it with their bank account statement and transaction confirmation slips. Investors should regularly check their ledger balance and report any discrepancy or error to their DP or broker as soon as possible.

Wrapping Up

In conclusion, the ledger balance is a daily record of all cash transactions related to securities in an electronic form. It shows the amount of money available or required in the demat account at the end of each business day. It is useful for investors to manage their finances and investments effectively.