A beginner when opens a demat account, he/she always have this question running in their head – is it safe? Similarly, traders who have gone through Zerodha demat account opening, keep asking, is Zerodha safe?
If you are thinking in similar lines, well, don’t worry – you are not alone.
Is discount broking a bubble waiting to get burst?
Honestly, such questions are completely valid, especially from traders who have been investing in the share market space over a span of years. At the same time, these questions come from such people who are looking to go ahead with zerodha demat account opening.
Although, the concept of discount broking has been around for 8-10 years in the Indian trading space, however, age-old investors are left frowning over such low brokerage charges.
Thus, the question “Is Zerodha Safe or not” does not come as an out of blue sort of a question. Well, the point is simple. If you are interested in Zerodha or any broker you are looking to select for your share market trading, there are a few things that must be looked at.
How old is Zerodha in the Indian Stockbroking scene?
Zerodha was the first discount stock broker in India and was established in the year 2010. Before the discount broker entrance into the Indian share market industry, there were primarily full-service stockbrokers. These brokers provide an array of services and charge a reasonable brokerage for that.
Also, Zerodha selects the investor carefully. It looks deep into the client details who approach for opening demat account with them. Zerodha IPV makes use of highly advanced technology that checks all details and assure that every information is true in itself, thus preventing fraudulent.
Discount broking is basically a no-frills concept where the brokers provide limited services at a nominal rate and so does Zerodha.
Is Zerodha a registered stockbroker with SEBI and other regulatory bodies?
Yes, Zerodha is registered with different regulatory bodies. Its registration details include SEBI (INZ000031633), CDSL (IN-DP-100-2015), MCX: 46025 | NCDEX: 1138.
You are strongly asked to request the SEBI and other related registered numbers from the broker you are looking to open your demat account with. Then, confirm those details from the respective websites.
How many active clients does Zerodha have?
As per the latest numbers of the financial year 2019-20, Zerodha has an active clients base of 10,25,620.
As far as ranking is concerned, Zerodha is positioned at number 1 in the overall stockbroking space in India.
Zerodha is one of the very few stockbrokers (and in fact the only discount broker in India) which is actually a profitable company. In the financial year of 2017-18, Zerodha cloaked Profit Before Taxes in the range of ₹180 Crore.
In the recent past, in an interview, the founder of Zerodha (Nitin Kamath) even ruled out the possibility of any outside funding since they are looking to keep the control of the business to themselves.
This is a very good sign for a business where the management believes in what they are doing and don’t seem to need any extra money for their business operations.
How many complaints does Zerodha get from its clients?
In this financial year till now, Zerodha has received 112 complaints from its overall active client base of more than a million (as mentioned above). This converts to around 0.01% of the overall client base while the industry average stands at 0.03%.
Furthermore, the broker has already resolved 93.75% of these complaints.
This hints that Zerodha is one of the trustable brokers by its existing client-base.
Since Zerodha is a profitable entity and has been around in the industry for around 8-10 years already – the chances of a goof-up are limited. As far as long-term investments are concerned, your shares are always stored in a demat account that is outside the control of Zerodha or any stockbroker anyway.
Stocks are kept under the control of Indian depositories viz. CDSL, NSDL.
Even if Zerodha goes out of business, your demat account and the shares inside it will be untouched.
However, the trading capital that is still un-invested stays in the control of your broker.
Are the trading platforms of Zerodha secure and speedy?
These concerns have been raised majorly around the mobile app offered by the broker.
What if, as an extreme case, Zerodha goes Bankrupt?
In an extreme case where Zerodha actually goes bankrupt, all you need to do it file a claim with complete details of your demat and trading account, and corresponding action will be taken up by the depository.
There is something called ‘Investor Protection Fund’ which works as a backup plan against such extreme market conditions where a broker or more go out of business.