How to Link Demat Account with Bank Account?

In this digital era, managing money has become easier than ever. With more and more people choosing to open a bank account, the convenience of digital banking has made it smoother to manage our finances, save money, and further build wealth for the future with investing. 

And for wealth creation through investing and trading, having the right set of accounts is crucial. Below are the most important accounts that an investor needs: 

• Demat account 
• Savings account

Moreover, a trading account is just as important as the above two. Since, through it, you buy and sell securities in the stock market. Each of these accounts plays a distinct role in the securities market.

As of September 2024, the total number of Demat accounts in India reached 17.5 crore. Meanwhile, in FY23, the number of savings accounts in the country had already crossed the 300 crore mark. And here's the catch: While both Demat and savings accounts are essential, magic happens when they're linked. That's where the game of wealth creation truly begins. 

In this article, we'll explore the benefits of linking your Demat account with your bank account and understand how it can simplify your investment/trading experience. Let's break it down for you.

Table of Contents:

1. Essential Accounts for Trading in the Securities Market
2. Linking Demat with Bank Account
3. Why Linking Your Demat and Bank Account Matters
4. Benefits of Linking Demat Account with Bank Account
5. How to Link Demat Account with a Bank Account
6. Primary vs Secondary Bank Account
7. Step-by-Step Process: How to Link Your Bank Account
8. Common Reasons for Rejection
9. How to Change or Update Your Linked Bank Account
10. Conclusion
11. FAQs

Essential Accounts for Trading in the Securities Market

Before jumping into the benefits of linking your Demat account with your bank account, you need to understand the purpose and function of each type:

1. Savings Account: It's your starting point for investments.

The most basic type of account you can open at any bank of your choice. You can use it to deposit, save, and withdraw your funds. When you invest in securities, your savings account serves as the launchpad for funding trades and receiving proceeds from investments.

2. Demat Account: Your investments' digital vault.

A Demat account, short for "dematerialisation", holds your securities in an electronic form. Be it shares, bonds, Mutual Funds, and other financial instruments, your Demat account is a secure digital space to hold them.
This account makes the buying, holding, and selling of securities faster and more efficient. For more details, you must read about the blog on the Demat Account.

3. Trading Account: Your gateway to the market or a shopping cart for your investments.

Held with a stockbroker registered with a recognised stock exchange, it’s the bridge between your Demat and bank accounts. It connects you to the market, enabling you to buy and sell securities with ease. 

The broker facilitates these transactions and charges a brokerage commission, which is regulated and capped as per SEBI guidelines.

Confused between a Demat account and a Trading account? Click on the link to know the major difference between them- Demat Account vs Trading Account

Now, are you ready to explore how linking your Demat and bank accounts can simplify your financial life? Scroll down!

Linking Demat with Bank Account

Linking your Demat account with your bank account is an essential step in streamlining your investment process. When these accounts are linked, funds can be easily transferred between them, enabling quick settlement of trades and reducing the risk of errors. 

Picture this: You spot a promising stock, and with a few clicks, the funds are transferred, the shares are yours, and dividends are received straight into your account—no more manual effort, no more missed opportunities. 

These are just a few of the benefits of linking your Demat and bank accounts.

Moreover, with SEBI's recently introduced T+1 settlement cycle (trade date + 1 business day), your buy or sell transactions can now be processed faster.

Simply linking your Demat account with your bank account ensures that shares, dividends, interest, or bonus issues are credited automatically. This eliminates the need for manual tracking and reduces the risk of missing payments.

So why wait? Link your Demat and bank accounts to ensure your investment journey is smooth, fast, and free of manual hassles. And if you want to know which broker can be suitable for your investment pattern, Finology Select can help you identify the one!

Looking to open your account with one of India’s top brokers? These Demat Account Opening guides explain the exact steps for both joint and individual setups.

The stock market moves quickly—so should you!

If your Demat account isn’t linked to your bank account, almost every market transaction will face delays or failures. SEBI mandates bank-Demat linking to ensure verified fund flow, reduce fraud, and support India’s T+1 settlement ecosystem. Whether it’s dividends, IPO refunds, or sale proceeds, everything is credited automatically only when your bank account is correctly linked.

This guide explains how to link your bank account with a Demat account, why it matters, compliance rules, the step-by-step process, rejection reasons, and solutions.

Linking your Demat account with your bank account means your broker and depository participant (DP) verifies your bank details and enables seamless debit and credit of funds. When linked:

• Money for buying securities flows from your bank to your trading account.
• Sale proceeds flow from your trading account back to your bank.
• Corporate action payments (dividends, buybacks) flow directly to your bank.

When you link a bank account, the broker verifies your:

• Account number
• IFSC
• Name matching PAN records
• Account type (savings/current)

This linking ensures a clean money trail — a core requirement under SEBI and PMLA guidelines.

A simple way to think of it:

• Bank account → Money source
• Trading account → Transaction engine
• Demat account → Securities storage

All three together form a complete, compliant investing cycle.

Why Linking Your Demat and Bank Account Matters

4.1 Faster Settlements Under T+1

India shifted to a T+1 settlement cycle in January 2023. If you buy shares worth ₹15,000 today, funds must be blocked or debited instantly. Similarly, when you sell shares, the payout is credited the next business day — but only if your bank is linked correctly.

A linked bank account ensures:

• Automatic fund debits for purchases
• Quick credits for sale proceeds
• Zero manual intervention

4.2 Smooth Refunds for IPO Applications

IPO applications now follow the ASBA (Application Supported by Blocked Amount) system. Your bank blocks the IPO amount and releases unutilised funds automatically.

If the linked account is incorrect:

• The application can be rejected
• Refunds may be delayed
• Amount may remain blocked beyond IPO timelines

4.3 Timely Dividend, Bonus & Corporate Action Credits

Corporate benefits are credited:

• Dividends → directly to the linked bank
• Bonus shares → to Demat
• Buyback proceeds → to bank
• Rights issue refunds → to bank

Any mismatch results in failed credits or long delays.

4.4 Prevents Fraud & Unauthorised Transactions

SEBI has tightened verification norms to prevent brokers or third parties from misusing investor funds. Linked bank accounts ensure:

• No third-party transfers
• Funds move only through the verified account
• Brokers cannot credit funds elsewhere

4.5 Easier Pay-in and Payout of Funds

A linked bank account eliminates the need for manual IMPS/NEFT transfers. Most brokers now support UPI AutoPay, ensuring quicker fund movement.

Is It Mandatory to Link Your Bank Account to Your Demat Account?

Yes. SEBI regulations require every Demat account to be linked to at least one bank account before activation. Without a linked bank account:

• You cannot transfer funds
• You cannot receive payouts or refunds
• Corporate actions will fail
• Brokers may freeze your account

SEBI’s KYC rules and AML guidelines mandate a verified bank account to ensure traceability and prevent misuse.

Benefits of Linking Demat Account with Bank Account

Linking your Demat account with your bank account isn’t just a convenience; it’s a game-changer for efficiently managing your investments and finances. 

Here are the key benefits of the same: 

• Smoother Fund Transfers: Linking your Demat account with your bank account facilitates instant credit and debit of funds.
  It ensures that the money needed for buying shares is available promptly, and proceeds from selling shares can be instantly transferred to your bank account. This reduces the time taken for transactions.
• Enhanced Security: The interlinked accounts improve security.
  It reduces the risk of fraud, as the transactions are closely monitored, and unauthorised withdrawals can be prevented.
• Better Investments Tracking: Having all your financial transactions linked makes account management easier.
  You can track all your investment activities, view transaction histories, and get a consolidated view of your financial standing.
• Better Pricing: Skip transfer fees to save more, because more savings mean more to invest.
  Linking your savings and Demat accounts eliminates fund transfer fees and upper limits on transfers. This ensures smoother access to competitive investment prices tailored to your risk profile.
• Access to More Investment Options: Linking your savings account with a Demat account will also allow easy investments in gold bonds, Mutual Funds, and other financial instruments.
• Easy Dividend Payouts and Interest Credit: When your Demat account is linked with your bank account, dividends and interest on investments are directly credited to it.
  This automated process removes the need for manual dividend collection and ensures you receive receipt of generated income on time.
• Additional Value-added Services: Linking your Demat and bank accounts can allow you to get access to value-added services from some financial institutions. 

Summary of Key Benefits

• Faster T+1 settlements
• Seamless IPO refunds
• Automatic dividend credit
• Secure pay-in and payout
• Lower risk of fraud
• Compliance with SEBI rules
• Smooth mutual fund & SIP transactions

These services, such as research reports, investment advice, and personalised financial planning tools, can help you make better investment decisions and optimise your portfolio.

To open a Demat account, compare brokers using Finology Select and find the one that matches your investment needs.

How to Link Demat Account with a Bank Account

Linking your Demat account with your bank account is simpler than you think. Just a few steps, and you're set. To open a Demat account, you just have to submit your address proof, PAN card, and bank account details to a Depository Participant (DP), who will link your Demat account with your savings account.

If your Demat account isn't linked to your bank account yet, here's how you can get it done:

• Check Prerequisites: Verify that the necessary KYC (Know Your Customer) documentation is updated and accurate in both accounts.
   
• Reach Out to Your Broker: Contact your broker managing your Demat account to request that it link with your bank account. You can usually make this request online via your broker’s portal or by visiting their branch.
   
• Provide Required Details: Share your bank account details, such as account number, IFSC code, and branch address. Some brokers may also require a signed request form.
   
• Verification Process: Once you submit your request, it may take a few days for the linking process to complete. During this time, your broker will verify the details with your bank.
   
• Confirmation: After successful verification, you’ll receive a confirmation that your Demat account is linked to your bank account. 

You can then start enjoying the benefits of smooth and streamlined investment transactions. Link your Demat and bank accounts today so that your future self can thank you!

Primary vs Secondary Bank Account: What’s the Difference?

• Primary bank account
  • Used for payouts, refunds, dividends, and redemptions
  • Must match PAN and KYC
     
• Secondary bank account(s)
  • Optional
  • Can be used for deposits
  • Useful for traders with multiple accounts

Most brokers allow 1 primary + up to 1–3 secondary accounts.

How Many Bank Accounts Can You Link to Your Demat Account?

Across major brokers, the general rule is:

• One primary bank account is mandatory for your demat account. Most brokers allow 1-3 secondary bank accounts for deposits only.

Linking multiple accounts helps:

• Traders use dedicated “funding accounts”
• Small businesses separating investment and operational accounts
• Investors diversifying banking risks

However, only the primary account gets payouts and dividends.

Step-by-Step Process: How to Link Your Bank Account to Your Demat Account

Via Broker App

1. Go to Profile / Account Settings
2. Select Bank Details
3. Click “Add Bank Account”
4. Enter account number + IFSC
5. Upload a cancelled cheque or bank statement
6. Complete e-verification (OTP via bank/UPI)
7. Wait for approval (typically 24–48 hours)

Via Desktop: Same steps as above, except document upload may require JPEG/PDF formats.

Required Documents

• Cancelled cheque
• Bank passbook copy
• Last 3-month statement
• Self-attested PAN (in rare cases)

Timeline: Most brokers complete verification within 24–72 hours.

How to Check if Your Bank Account Is Already Linked

Through Broker Dashboard

• Go to “My Account”
• Check “Linked Bank Details”
• Verify IFSC + account number masking

Through NSDL/CDSL

Select “Account Details” → verify registered bank.

You’re successfully linked if:

• Bank shows “verified” or “active” status
• Payouts land without delay

Common Reasons Why Bank Linking Gets Rejected

Reason	Why it Happens	Solution
Name mismatch	PAN vs bank records differ	Update name in bank or PAN
Signature mismatch	Old signatures in records	Update signature with bank
Wrong account type	NRI/NRO used in resident account	Select correct category
Joint account	Non-primary holder applying	Ensure primary holder signs
Dormant account	No activity for 12+ months	Reactivate at bank
Incorrect IFSC	Branch code updated	Use latest IFSC
Poor scan of cheque	Blurred or cropped	Upload clear image

What Happens If You Don’t Link Your Bank Account?

If your Demat account is not linked to a bank account:

• You cannot buy or sell securities
• Depository may freeze your account
• IPO refunds will fail
• Dividends will not be credited
• Sale proceeds will not be transferred
• Trading account may become non-compliant

Example:
If you sell shares worth ₹50,000 but your bank details are wrong, your payout gets stuck, and the broker can’t manually credit it due to SEBI rules.

How to Change or Update Your Linked Bank Account

When Should You Update?

• Old bank account closed
• Migrating to a new salary/savings bank
• Branch IFSC change
• KYC update
• Moving to a zero-balance account for trading

How to Update (Online)

1. Go to profile settings
2. Choose “Modify Primary Bank”
3. Upload documents
4. Complete e-verification
5. Wait 24–48 hours

Offline Method

Submit a modification request form with:

• Cancelled cheque
• Self-attested PAN
• Signed request

Double-Check Before Updating

• Account is active
• IFSC is correct
• Name matches PAN
• Cheque is not older than 3 month

Charges Involved

• Linking a new bank account: Usually free
• Modifying an existing bank account: ₹0 to ₹100
• DP charges: Vary across brokers

Most discount brokers offer free online modification.

Does Bank Linking Affect Mutual Funds, SIPs & Auto-Debits?

Yes.
If your SIP is linked to an old or incorrect bank account:

• SIPs will fail
• Auto-debit mandates will decline
• Redemption proceeds may fail

Mutual fund redemptions and dividends always go to the primary linked bank account for your Demat/KYC, not the bank you used for UPI payment.

Troubleshooting, Safety & Compliance

Checklist:

• Confirm your bank is the primary linked account
• Verify IFSC after bank merger (common issue in PSU banks)
• Check if the account is active
• Ask your broker for the payout reference number
• Re-link the bank account if necessary

Escalation Path:

1. Broker support
2. Depository participant
3. Bank branch
4. SEBI SCORES (if unresolved within 30 days)

SEBI regulations require:

• Verified bank account
• PAN-bank matching
• No third-party payouts
• Secure fund transfers

Depositories (NSDL/CDSL) use encrypted verification to ensure your funds and securities stay protected.

Conclusion

Linking your Demat account with your bank account may seem like a small formality, but it plays a crucial role in keeping your investing smooth, secure, and compliant. With India’s T+1 settlement cycle, faster IPO refunds, and automated credits for dividends and corporate actions, accurate and updated bank details ensure that every transaction happens seamlessly. Whether you're buying, selling, or receiving payouts, linked and updated accounts help maintain a safe and reliable investing experience. Don't wait! Contact your broker today to link your accounts and take the first step toward streamlined investing!

Still unsure which type of account is right for you? Use Finology Select's demat account comparison tool to explore AMC charges, nominee rules, and onboarding processes across 20+ stock brokers, all in one place.

FAQs

1. Why is bank account linking needed for a Demat account?
   It ensures verified fund flow, compliance with SEBI rules, and smooth credit/debit for trades, dividends, and refunds.
    
2. Can I link two banks to my Demat account?
   Yes, most brokers allow one primary and one to three secondary bank accounts.
    
3. How long does linking take?
   Typically 24–72 hours depending on your broker’s verification process.
    
4. Why was my bank linking rejected?
   Common reasons include name mismatch, wrong IFSC, dormant accounts, joint account mismatch, or unclear cheque upload.
    
5. Does linking or modifying a bank account cost anything?
   Linking is usually free; modification charges range from ₹0–₹100 depending on the broker.
    
6. Can I use a joint bank account?
   Yes, but the primary holder's name must match the Demat account.
    
7. How do I check if my bank account is linked?
   Check your broker portal under “Bank Details” or view registered details on NSDL/CDSL.
    
8. How do I change my linked bank account?
   Update online via your broker’s app or web portal and complete e-verification.
    
9. Can I trade without linking a bank account?
   No, fund transfers and payouts are not allowed without a verified bank account.
    
10. Which account is used for dividends and refunds?
    Always the primary linked bank account.
     
11. Can a Demat account work without a bank account?
    Technically no — the account can be opened, but it won’t be fully operational.