Demat Debit and Pledge Instruction (DDPI) is a type of authorization given by an investor to a depository participant (DP) to debit or pledge securities held in their demat (dematerialized) account.
Selling stocks without entering CDSL OTP or T-PIN-based e-DIS process is only one of the benefits of opting for DDPI. This is a cumbersome process for many traders to exit their holdings, particularly if you are thinking of automating your investing process using tools like Algomojo.
A Demat debit instruction allows the DP to debit the specified quantity of shares from the investor’s demat account, typically for the purpose of selling them in the stock market. A pledge instruction, on the other hand, allows the investor to pledge their securities as collateral to obtain a loan or credit facility.
In both cases, the investor needs to provide a DDPI to their DP, specifying the quantity and type of securities to be debited or pledged. The DP will then execute the instruction on the investor’s behalf. It’s important to note that debiting or pledging securities without the investor’s authorization is illegal and could result in legal action.
SEBI Circular on Demat Debit and Pledge Instruction (DDPI)
How DDPI is better than POA?
POA stands for Power of Attorney. When an investor opens a demat account with a broker, they are required to provide a POA authorizing the broker to conduct certain transactions on their behalf.
The POA allows the broker to debit shares from the investor’s demat account and sell them in the stock market to fulfill trades initiated by the investor. It also enables the broker to transfer shares from the investor’s demat account to another account, such as when the investor wants to sell the shares to a third party.
However, there have been cases of brokers misusing the POA. In some instances, brokers have used the POA to transfer securities out of an investor’s account without their knowledge or consent or to pledge securities as collateral for loans without informing the investor. This can result in significant financial losses for the investor and can be difficult to rectify.
DDPI is a type of authorization in investing that has specific limitations and purposes. It allows for the debiting of shares only when a user initiates a sell trade and is restricted by the Securities and Exchange Board of India (SEBI) for certain purposes. These include transferring and pledging/re-pledging securities, conducting mutual fund transactions through a Demat account, and tendering shares in an open offer. It’s important to note that effective from November 19th, 2022, DDPI will replace PoA. POA requests updated before 1st Sep 2022, will continue to work as long as the client doesn’t revoke the same
If a client does not provide a POA, they have the option to choose DDPI instead. However, if the client also does not submit DDPI, they will need to submit an electronic delivery instruction slip (E-DIS) each time they make a stock sell transaction. This can become burdensome for the client if they have to submit the E-DIS multiple times.