What is TPIN in a Demat Account?

Last Updated on December 11, 2023 by BFSLTeam BFSLTeam

A demat account is an account that allows investors to hold and trade securities in electronic form. It eliminates the need for physical certificates and reduces the risk of theft, loss, or damage of securities. A demat account also offers convenience, speed, and efficiency in transactions, as well as lower costs and taxes.

However, with the increasing use of online platforms and digital modes of payment, the security of a demat account becomes a crucial concern for investors. How can they ensure that their securities are safe from unauthorised access, misuse, or fraud? How can they prevent their brokers from engaging in unethical or illegal practices with their securities? How can they have more control and transparency over their transactions? 

To address these issues, the Securities and Exchange Board of India (SEBI), the regulator of the securities market in India, introduced a new feature called TPIN (Transaction Personal Identification Number) in June 2020. TPIN is a 6-digit password that authorises the broker to debit specific stocks from the investor’s demat account. It also functions as an alternative to the demat power of attorney (POA), which was previously required to allow the broker to access the investor’s demat account.

What is TPIN Number?

Are you wondering, “what is TPIN in CDSL?” TPIN is a unique and confidential password that is issued by the depository to the investor. A depository is an institution that holds the securities of investors in electronic form. There are two depositories in India: National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL). An investor can open a demat account with either of these depositories through a depository participant (DP), who acts as an intermediary between the depository and the investor. A DP can be a bank, a broker, or any other financial institution.

TPIN is generated by the depository and sent to the investor’s registered mobile number and email address. The investor can also generate or reset the TPIN online through the depository’s website or app by using an OTP (One Time Password) verification process. The investor should keep the TPIN confidential and not share it with anyone, including the broker or the DP.

How does TPIN work & How To Generate CDSL TPIN?

TPIN works as a second layer of authentication for online transactions involving securities. Whenever an investor wants to sell securities from their demat account, they need to provide their TPIN along with their login credentials to authorise the transaction. The TPIN authorises the broker to debit only those securities that are specified by the investor for that particular transaction. The TPIN authorization is valid only for one day and only for those securities for which it is given.

For example, suppose an investor wants to sell 100 shares of Reliance Industries from their demat account. They need to log in to their trading account, select the shares and quantity, and enter their TPIN to confirm the transaction. The broker will then receive a confirmation from the depository that the investor has authorised them to debit 100 shares of Reliance Industries from their demat account. The broker will then execute the transaction and credit the proceeds to the investor’s bank account.

Why is TPIN important?

TPIN is important because it enhances the security and transparency of online transactions involving securities. It prevents unauthorised access, misuse, or fraud of securities by ensuring that only the investor can authorise the movement of securities from their demat account. It also eliminates the need for signing a POA document, which was previously required to allow the broker to access the investor’s demat account.

Disadvantages Associated With POA Documents

A POA document is a legal document that gives authority or rights to another person or entity to act on behalf of someone else. In case of a demat account, a POA document gives authority or rights to the broker to debit securities from the investor’s demat account whenever they sell them. However, there were some drawbacks and risks associated with POA documents:

• Some brokers misused or abused POA documents by engaging in unauthorised trades without the consent or knowledge of investors. They would debit securities from investors’ accounts even when they did not place any sell order or transfer securities without their permission.
• Some brokers intimidated or harassed investors into paying for losses incurred from unauthorised trades or threatened them with legal action if they revoked their POA documents.
• Some brokers charged higher fees or commissions for providing POA documents or refused to open demat accounts without POA documents.
• Some investors faced difficulties in revoking or changing their POA documents due to cumbersome procedures or lack of awareness.
• Some investors were not comfortable with giving away their rights or control over their demat accounts to brokers.
• With TPIN, these issues are resolved as investors do not need to sign any POA document to trade online. They can independently authorise each transaction involving securities from their demat account using their TPIN. They can also revoke or change their TPIN anytime online without any hassle. They can also monitor and track their transactions and holdings through the depository’s website or app.

What are the benefits of TPIN?

TPIN offers several benefits for investors, such as:

• It provides an extra layer of security and protection for online transactions involving securities. It prevents unauthorised access, misuse, or fraud of securities by ensuring that only the investor can authorise the movement of securities from their demat account.
• It gives more control and transparency to investors over their transactions and holdings. They can independently authorise each transaction involving securities from their demat account using their TPIN. They can also revoke or change their TPIN anytime online without any hassle. They can also monitor and track their transactions and holdings through the depository’s website or app.
• It simplifies and streamlines the process of online trading. It eliminates the need for signing a POA document, which was previously required to allow the broker to access the investor’s demat account. It also reduces the paperwork, time, and cost involved in online trading.
• It enhances the efficiency and convenience of online trading. It allows investors to trade anytime and anywhere using their mobile phones or computers. It also enables faster execution and settlement of transactions.

Conclusion

TPIN is a 6-digit password that authorises the broker to debit specific stocks from the investor’s demat account. It also functions as an alternative to the demat power of attorney (POA), which was previously required to allow the broker to access the investor’s demat account. TPIN is important because it enhances the security and transparency of online transactions involving securities. It prevents unauthorised access, misuse, or fraud of securities by ensuring that only the investor can authorise the movement of securities from their demat account. It also gives more control and transparency to investors over their transactions and holdings. TPIN offers several benefits for investors, such as simplifying and streamlining the process of online trading, reducing the paperwork, time, and cost involved in online trading, enhancing the efficiency and convenience of online trading, and allowing faster execution and settlement of transactions.