SBI asks employees to take approval before opening demat accounts outside the group

The State Bank of India (SBI), the country's largest lender, has issued a directive requiring its employees to obtain approval before opening demat or trading accounts with external service providers. According to an internal circular dated May 27, any violation of this directive will be considered gross misconduct and will be subject to disciplinary action. Moneycontrol has reviewed a copy of the circular.

“No officer/award staff shall open their or their wholly dependent family member’s demat account and or trading account outside the State Bank Group without prior permission of his/her controller not below rank of Chief General Manager,” the circular says.

The SBI Group encompasses various companies within the broader financial sector, including SBI Cards, SBI Life, SBI General Insurance, SBI Funds Management, and SBI Pension Funds. SBI Securities serves as the group's brokerage division. “Breach of these instructions shall be treated as a misconduct punishable amongst others under Rule No. 50(1), 50(4), 50 (11) read with Rule 66 of SBIOSR for officers,” the circular says.

A demat account is an online portfolio designed to simplify the management of investments like shares, bonds, mutual funds, and ETFs. It eliminates the need for physical handling and trading of paper shares and other documents.

The bank has instructed employees to submit the demat account statements of both themselves and their dependent family members to their supervisors for verification. Additionally, employees must either obtain formal permission from their supervisors within six months of the instruction's issuance or close these accounts within that timeframe.

And legal experts highlighted that a company cannot impose on its employees to use the services of the employer group. "Banks and companies may issue caution to employees for trading as it is done during the normal working hours. Since they also have policies under which employees have to make declaration about their investments, they cannot prohibit using services outside their company or group," said Mukesh Chand, Senior Legal Counsel • Economic Laws Practice (ELP).

India had 151 million demat accounts at the end of the financial year 2023-24, data analysed by brokerage Motilal Oswal shows. As many as 3.1 million new accounts were added in March alone. “This trend seems to be continuing throughout the year, with an average of 3.1 million new accounts opened each month in the financial year 2024 (FY24),” Motilal Oswal said.

According to another report by Motilal Oswal, citing National Stock Exchange (NSE) data, Groww became the largest broker in FY24, capturing a 23.4 percent market share and managing an active client base of 9.5 million. The broker experienced a 77.5 percent increase in its active client base and a 42 percent overall rise in market share during FY24.

Following Groww is Zerodha, which saw a 14% increase in active clients, reaching 7.3 million. Despite this growth, the Bengaluru-based brokerage firm's market share declined to 17.9% at the end of FY24, down from 19.6% in the previous year.