More than 40 lakh new demat accounts opened in four years, brokers reduced by 40 percent

Mumbai: With the entry of a new class of investors into the stock markets in the country, equity investment has seen a huge increase in the last few years. Due to the growing interest of the youth towards investing in shares, more than 40 lakh new demat accounts have been opened in the last four years, but on the other hand, the broking business has seen intense competition from discount broking enterprises on the one hand and big broking houses on the other. . The full book broking business has been the death knell for many broking houses with their own corporate-banking infrastructure. There has been a huge decline of 40 per cent in the number of brokers, with many brokers closing down their business as new small to medium entrepreneurs shy away from entering the sector.

In the broking sector, the number of brokers registered in the stock exchanges was 8269 brokers in March 2021 which has decreased to 5091 in November 2024. Which shows a reduction of 40 percent. In contrast, the number of demat accounts has tripled from 5.50 crore to 18.2 crore during this period.

According to market experts, competition on one hand and regulatory compliance on the other, continuous increase in regulatory compliance and cost of investment in technology are increasing, making it difficult for small to medium brokers to survive against big broking houses.

Meanwhile, there has been a significant increase in the number of Authorized Persons (APs), now known as sub-brokers. The number of authorized persons registered in both the stock exchanges has crossed two lakhs. Nine mid-sized stock brokers have been inducted as APs by Kotak Securities in the last one and a half year.

Of course, the increase in the number of apps is creating a new problem for the industry and the cases of unregulated apps promoting unapproved products to attract customers are also increasing. However, SEBI is working on implementing strict rules for such apps.

Sources say criteria including clear definition for AP service, NISM exam for recognition, limits on commission, background of the individual are likely to be introduced. Strict standards will prevent misuse of the system by such sections. The stock exchanges have also directed brokers to conduct due diligence and investigation before taking up the APP.