Karvy on WebNotes

Why Zerodha discontinued the demat POA and moved to DDPI

Sat, 20 Jun 2026 00:00:00 +0000

The broker demat power of attorney (POA) is the authorisation a client once gave a stockbroker to debit securities from the client’s demat account and deliver them to the exchange, which SEBI discontinued for new clients and replaced with the Demat Debit and Pledge Instruction (DDPI) through circular SEBI/HO/MIRSD/DoP/P/CIR/2022/44, dated 4 April 2022, effective for new clients from 1 September 2022. Zerodha adopted the DDPI for new clients from 19 November 2022, while leaving every POA submitted earlier valid until revoked.

Karvy pledge misuse incident (2019)

Tue, 19 May 2026 00:00:00 +0000

In November 2019, Karvy Stock Broking Limited (KSBL), one of India’s largest retail broking firms, was found to have misused client-pledged shares worth approximately Rs 2,800 crore for proprietary trading and to fund related-party transactions. The incident triggered one of the largest broker fraud cases in Indian capital markets and led to SEBI banning Karvy from accepting new clients, freezing client assets, and ordering reparations.

While the case primarily involved equity broking, it had implications for the broader mutual fund distribution ecosystem since Karvy was also a major mutual fund distributor and the Karvy group included KFin Technologies (formerly Karvy Computershare), the major mutual fund RTA.

SEBI margin pledge rules (September 2020 framework)

Mon, 18 May 2026 00:00:00 +0000

Margin pledge is the mechanism by which an investor uses securities held in their own demat account as collateral for trading margin, by creating a pledge in the broker’s favour at the depository (CDSL or NSDL ) instead of transferring the securities to the broker. The securities stay in the investor’s account with a pledge flag set, and the broker re-pledges them to the clearing corporation to generate collateral margin against the investor’s futures and options positions. It is a charge over the securities, not a loan or a sale; the investor keeps ownership, dividends, and bonus entitlements throughout.

Karvy Stock Broking pledge-misuse case (2019) and RTA implications

Tue, 12 May 2026 00:00:00 +0000

The Karvy Stock Broking pledge-misuse case of 2019 was one of the most significant broker-client securities fraud incidents in Indian capital market history. Karvy Stock Broking Limited (KSBL), one of India’s largest equity brokers by client account count, was found to have pledged client securities held in client demat accounts, without the knowledge or authorisation of those clients, with banks and NBFCs to raise loans for the benefit of Karvy group companies, including its real estate arm. The total unauthorised pledges amounted to approximately Rs 2,873 crore, affecting approximately 95,000 client accounts. The episode prompted emergency regulatory action by the Securities and Exchange Board of India , CDSL, and NSE, and raised specific governance concerns about the role of Karvy’s integrated registrar and transfer agent (RTA) business in the group’s operations.