Are you enticed by the quick and high returns offered by the soaring stock markets in India? The lure of making money in equities is sufficient enough to gain any potential investor’s attention. But, to invest in equity shares, you need to meet some basic requirements. Opening a Demat account is one such essential tool for entering into the stock market arena. Demat accounts, facilitate easy and secure way of holding your investments.
So, we thought of sharing a comprehensive guide on everything that you should know about opening Demat accounts in India.
Gear yourself up to learn what Demat account is, its benefits and how to open a Demat account in a hassle free manner. An investor’s complete guide for understanding the meaning of demat accounts and also knowing the procedure for opening demat accounts in India.
What is Demat Account?
A Demat or Dematerialised account is just like your bank account, the difference being that it holds shares, securities, bonds or debentures instead of money. So, if you wish to trade in the Indian stock market i.e. buy and sell securities, firstly you need to have a Demat account.
Demat accounts provide the benefit of holding shares and securities in an electronic form, a great alternative to physical certificates. Not only shares, but demat accounts can be used for holding other investments like mutual funds, government securities, bonds, ETFs etc.
Procedure for Opening Demat Account:
While opening a demat account, you need to get familiar with two important terms: Depositories and Depository Participants (DP).
Depositories refer to the organisations that hold your securities electronically and allow you to perform transactions. National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL) are the two depositories registered with Securities Exchange Board of India (SEBI).
Whereas a Depository Participant or DP acts as an agent or intermediary between investors and depositories. DP can be a financial organisation like banks, stock brokers etc. The account that you open with a DP is known as Demat account. You are required to open a demat account with a Depository Participant (DP registered with SEBI) for availing the services offered by depositories.
How to Open Demat Account?
For buying and selling securities, opening demat account is a pre-requisite. For that, you must be acquainted with the simple procedure of opening demat accounts.
1. Choose a Depository Participant or DP: Select a DP that offers good services. You can choose a DP that offers online services, thereby saving some of your time and money. You have the freedom to choose your DP plus you can open multiple demat accounts with different DPs.
Charges for Opening Demat Accounts:
As you finalise a DP, you shall be provided the agreement stating the terms and conditions including charges for opening demat accounts.
Some DPs don’t charge any fee and offer a Free Demat and trading account. This means you won’t need to pay any fee for account opening. While others may ask for a small fee. Apart from this, there are charges such as transaction fee, annual account maintenance fee associated to Demat accounts that may vary for different DPs.
2. Account Opening Form: You need to fill up and submit the Demat account opening form along with necessary details.
3. KYC Compliance: Adhere to Know Your Customer (KYC) norms and submit the copies of KYC documents to the Depository Participant.
List of Documents required for opening Demat Accounts:
- Identity Proof: PAN card, voter id, Aadhar card etc.
- Address Proof: Aadhar card, bank statement, driving license, utility bills etc.
- Bank account details
4. In-person verification: A representative of DP shall conduct in-person verification to cross check the information furnished by you in the Demat account form.
5. Obtain your Account number/Unique ID: Once the verification is completed, the DP shall provide you a Unique Account number or ID.
6. Get ready to access your Online Demat Account: Your unique ID is the key to access your online Demat account. You are good to go!
Now, that you know the entire procedure for opening Demat accounts in India. So, what are you waiting for? Did you know this was so simple and accessing your online Demat account was just few clicks away
Demat Accounts: Final Thoughts
Demat accounts have proved to be a wonderful digital tool, a safe and convenient way for holding your securities. Factors such as low risk, reduced paperwork and easy tracking of your investments at a single place thereby add to the numerous benefits of Demat accounts.
Looking at the Sensex and Nifty benchmarks touching new highs, investors are getting keen on equity investments. Are you also amongst the keen investors interested in stock investing? Have you opened a Demat account? If not, you can easily grab a 2-in-1 demat and trading account.