How has been the growth in the demat accounts in India in the fiscal year 2021-22?

The exponential growth in demat accounts that started during the pandemic in 2020 has continued well into FY22 also. For the twelve months to March 2022, the number of active demat accounts in India was up by 63% to 8.97 crore. This is the combined numbers of CDSL and NSDL put together, with CDSL leading the tally in terms of numbers while NSDL leads the tally in terms of the assets under custody in various accounts.

There have been several reasons for this surge in demat accounts during FY22. These include increase in smartphone usage, simpler digital onboarding and KYC of customers as well as the relatively attractive returns offered by equity markets. CDSL managed 6.30 crore demat accounts with assets under custody (AUC) of Rs.37.20 trillion, while NSDL handled 2.67 crore accounts with assets under custody of a whopping Rs.302 trillion.

The big boost to new demat accounts came in the post pandemic period during which period, the number of demat accounts more than doubled while the AUC doubled. Especially, the use of e-KYC and Aadhaar e-Sign facility made opening of demat accounts a paperless and simple process. The big thrust to demat accounts has also come from millennials which account for 80% incremental base; largely from tier-2 and tier-3 cities.

The influx of an army of brand new investors also boosted volumes in the stock market. In FY22, equity cash market turnover grew 9% while derivative volumes jumped 2.5 times with strong retail flows helping the cause. Experts peg the growth at much less than the 30% growth in the last 2 years, but strongly believe that this rally should continue.