SARAL account
Also written SARAL Account Opening Form · SARAL AOF
A simplified account for resident individuals trading only in the cash segment — no internet, margin or derivatives trading and no power of attorney — needing just one documentary proof of address.
In plain language
Many first-time investors live somewhere other than the address printed on their documents — a rented room in the city, a hostel, a company flat. Standard KYC can stall on exactly that.
The SARAL route relaxes one thing, proof of address, for the lowest-risk kind of account: an individual client participating only in the cash segment, without internet trading, margin trading, derivative trading or a power of attorney. Everything else about KYC stays as it is.
In exchange, the intermediary accepts a declared address without documents — and takes on the job of confirming it the old-fashioned way.
How it works
Eligibility. Individual clients in the cash segment who do not obtain internet trading, margin trading, derivative trading or use of power of attorney.
The relaxations (Chapter 7, section 7.3):
| Rule | What it means |
|---|---|
| One documentary proof of address | Either residence/correspondence or permanent, while opening a trading and/or demat account or while updating |
| Declared correspondence address | If the proof of address is not where the client currently lives, the intermediary may take a declaration of the residence/correspondence address. No proof is required for it |
| Change of address | The client may intimate the new address within two weeks of the change |
The safeguards.
- Positive confirmation. The declared address, and any change, may be verified by acknowledgment of receipt of the welcome kit or dispatch of contract notes or any periodical statement, by telephonic conversation, or by visits.
- The intimation letter. Where the client has given an address other than the one in the officially valid document, the intermediary forwards the KYC completion intimation letter by registered post, speed post or courier to that address.
- If it comes back — wrong or incorrect address, addressee not available — no transactions shall be allowed in the account, and intimation shall be sent to the stock exchange and the depository.
- Flagging. Intermediaries and KRAs flag such accounts in their records and systems.
A worked example
Illustrative client and dates.
Ms Lakshmi Murugan, a schoolteacher, wants to buy shares for delivery through Thamirabarani Securities. She wants no app-based trading, no margin, no F&O and no power of attorney. Her Aadhaar shows her parents' address in Salem; she lives in a rented flat in Madurai.
Opening. She gives one proof of address — her Aadhaar — and a declaration of the Madurai flat as her correspondence address. No rent agreement or utility bill is needed for Madurai.
Confirmation. Because the declared address differs from the OVD, the broker sends the KYC completion intimation letter to Madurai by speed post.
Scenario A. The letter is delivered and her welcome kit acknowledgment comes back signed. Positive confirmation is complete.
Scenario B. The letter returns marked "addressee not available". No transactions are allowed in the account; the broker intimates the stock exchange and the depository; the broker and the KRA flag the account.
Six months later she moves to Coimbatore on 1 March. She must tell the broker within two weeks — by 15 March.
A year later she asks for derivatives trading. She is no longer within the SARAL conditions, which are limited to the cash segment without derivatives.
Why NISM asks about it
Chapter 7 (SEBI Guidelines for KYC Norms in Securities Market), section 7.3, is the SARAL section. It produces tidy factual questions: the four facilities that take a client outside SARAL, the single proof of address, the two-week window for intimating a change, the three illustrative forms of positive confirmation (the workbook writes the list with two "etc."s, so it is not closed), and the consequence of a returned intimation letter.
Common exam traps
- SARAL relaxes proof of address only. PAN, proof of identity and due diligence are untouched.
- Any one of internet trading, margin trading, derivatives or power of attorney takes the client outside it.
- Individuals, cash segment — the section heading also describes it as for resident individuals.
- No proof is needed for the declared correspondence address — verification is by positive confirmation instead.
- Two weeks to intimate a change of address.
- A returned intimation letter stops all transactions, and both the exchange and the depository are told.
Check yourself
1.What address proof relaxation applies to a SARAL account?
- a)Only one documentary proof of address is required, and a declaration suffices for a different correspondence address with no proof needed
- b)No address proof is required at all
- c)Two proofs are required, as for all accounts
- d)Only Aadhaar is accepted
Show the answer
Answer: (a) Only one documentary proof of address is required, and a declaration suffices for a different correspondence address with no proof needed
For individual clients participating in the cash segment without obtaining various other facilities such as internet trading, margin trading, derivative trading and use of power of attorney, the requirement of submission of 'proof of address' shall be as follows: a. Individual client may submit only one documentary proof of address (either residence/correspondence or permanent) while opening a trading account and / or demat account or while undergoing updation.
One proof, of either kind — so option C is wrong, and option B goes too far since some proof is still needed.
And where the proof is not the current address: the intermediary may take a declaration of the residence/correspondence address on which all correspondence shall be made by the intermediary with the client. No proof is required to be submitted for such correspondence/residence address.
Changes must be notified quickly: in the event of change in this address due to relocation or any other reason, client may intimate the new address for correspondence to the intermediary within two weeks of such a change.
Verification is by conduct rather than paper. The address may be verified by the intermediary through 'positive confirmation' such as: i. acknowledgment of receipt Welcome Kit/ dispatch of contract notes / any periodical statement, etc. ii. telephonic conversation; iii. visits, etc.
And there is a hard consequence if the address is wrong. Where the client gives an address other than the OVD address, the registered intermediaries shall forward the KYC completion intimation letter through registered post/ speed post or courier — and on its return for wrong / incorrect address, addressee not available etc., no transactions shall be allowed in such account and intimation shall also sent to the Stock Exchange and Depository.
Plus a flag: the registered intermediaries and KRAs shall flag such accounts in their records/systems.
Note the trade-off. The relaxation is available only to a client foregoing internet trading, margin trading, derivative trading and use of power of attorney — a plain cash-segment account.
Where this is taught
Free preparation for NISM Series XXIVRelated terms
- KYC Registration AgencyA SEBI-created agency that holds an investor's verified KYC record centrally, so that one KYC completed with any securities market intermediary works with all the others.
- Officially valid documentsThe alternatives to Aadhaar accepted as identity evidence for KYC — driving licence, passport, voter ID and the NREGA job card — all of which the client supplies voluntarily.
- Know Your CustomerThe identity and address check every investor must clear before a bank, broker or depository participant will open an account — mandatory under the Prevention of Money Laundering Act, 2002.
- Third-party correspondence addressAn address belonging to someone other than the client, which SEBI lets a client use for correspondence only if the intermediary also completes full KYC and Rule 9 due diligence on that third party.
- Uniform KYC formatSEBI's rule that every registered intermediary uses the same KYC form and supporting documents — Part I of the account opening form built on CERSAI's templates, Part II left to the intermediary.
- Positive confirmationSEBI's way of checking a declared address without any document — the intermediary gets a response from the address, by a welcome-kit or statement acknowledgment, a telephone call, or a visit.