Ledger Balance In a Demat Account – What Is It?

Every Indian must have a Demat account for trading securities, according to the SEBI guidelines.  Demat account  holds all your shares, securities, and debentures in one place in an electronic form. 

You can open one such account with any bank or brokerage firm. 

However, all Demat accounts have a ledger balance that you need to understand. This balance highlights all transactions of your Demat account during a business day. Let us know more about it in detail!

What Is Ledger Balance?

The bank, brokerage or any other organisation in which you open a Demat account as an investor calculates its ledger balance at the end of every business day. 

This calculation and computation of all financial transactions in a ledger are done to determine the total cash inflow and outflow in the Demat account. Brokerage firms/banks measure this balance after reporting all transactions related to securities. 

Importance of Ledger Balance of a Demat Account

The ledger balance in a Demat account represents its cash inflow and outflow due to the daily transactions. From this, you can derive the details of the outstanding balance at the end of a business day and the starting balance at the beginning of the next business day.

You can easily derive any uncertain changes in your Demat account transactions by assessing its ledger balance. 

How Does the Ledger Balance of a Demat Account Change?

Ledger balance is a date-wise record reporting transactions of a Demat account of a particular day. The following steps will explain its entire working briefly:

Step 1: After processing and approving all transactions in a day, the brokerage firm with whom you have opened your Demat account records them all in its ledger. 

Step 2: These transactions are then entered and totalled on both the debit and credit sides of the ledger account. 

Step 3: Here, you can derive the difference between the sides, which later becomes the opening balance of the next operating day.

However, all of these funds you hold in your Demat account can only be accessible if each side of the ledger balance reflects the same. You can also face delays in processing fund inflows or deposits due to certain inspections conducted by the stock exchanges.

How Does the Ledger Balance of a Demat Account Work? – An Example

Let’s say Mr Aggarwal has a ledger balance of ₹1000. He also has a collateral margin from securities worth ₹1000. Now, suppose that he takes the margin up to ₹2000. Once his account gets debited, his ledger balance will eventually reflect a negative value of ₹1000. 

However, he won’t have to pay any delayed charge or fee as this collateral will act as coverage for the deficit of ₹1000.

Final Word

The ledger balance of a Demat account is the total sum available to the investors for margin trades or investments in securities. Moreover, before opening a Demat account, thorough research on the brokerage firm is also necessary.

Frequently Asked Questions

Q1. Is it possible to withdraw funds from the ledger balance of a Demat account?

Ans. No, it is not really possible to withdraw funds from the ledger balance of a Demat account. You can receive funds in your bank account by using your trading account, which links your Demat account and bank account. When the money is withdrawn from the Demat account, the amount is deducted from its ledger balance.

Q3. Can a ledger balance be negative?

Ans. A ledger balance shows a negative value, usually in the case of a Mark-to-Market (MTM) loss. In such cases, you will have to transfer funds to the Demat account to make up for the loss. If you fail to do so, you will not be allowed to trade in equity unless you compensate for the losses.    

Q4. What are the delayed payment charges of a Demat account?

Ans. The broker or bank may charge delayed payment charges of 0.5% or 18% on a daily or yearly basis, respectively.  

On the other hand, when the Demat account holder fails to maintain the cash margin, the brokerage will charge 0.035% daily or 12.775% annually. Moreover, in case of a shortfall, there will be non-cash collateral coverage with delayed charges to the account holder.