How to open a demat account?
How to open a Demat account?
A Demat account functions similarly to a bank account. The only difference is that Demat holds the securities, which might be in the form of shares, bonds, or debentures, rather than money in the bank account.
Demat account is mandatory to invest in the stock market. The present article briefs the procedure to open a Demat account.
Applicability of Demat account
As mentioned above, A Dematerialized (or Demat) account is an electronic account that holds securities instead of physical certificates.
An investor must open a Demat account with a Depository Participant in order to purchase and sell securities on the Indian stock market (DP).
In Demat accounts, what are depositories and depository participants (DPs)?
Depositories are companies that store securities electronically and make transactions easier. National Securities Depository Limited (NSDL) and Central Depository Services Limited are the two depositories registered with SEBI (CDSL).
Depositories and investors are represented by Depository Participants (DPs). The investor must go through a DP in order to use the services of a depository. A Demat account is the type of account you must have with a DP.
Advantages of opening a Demat account
- Because investors don’t have to pay stamp duty, the transaction cost is substantially lower than in the physical market.
- Electronic settlements are convenient and quick.
- In the event of a securities transfer, there will be less paperwork.
- Physical certificate risks such as theft, non-delivery, and false certifications are no longer a concern.
- Investors can sell any number of shares they choose, even if it’s just one.
- Invest online
Costs of establishing a Demat account
Most DPs do not charge a fee for opening a Demat account. Some charge a refundable account opening fee, while others demand a set fee.
Other fees include transaction fees, annual maintenance fees, and fees for changing shares from
KYC requirements for opening a Account
KYC (Know Your Customer) is a customer identification method that was implemented to avoid fraudulent behavior. To open a Demat account, you must meet SEBI’s KYC requirements.
Here’s what you’ll need to meet the KYC requirements:
- A PAN card, passport, voter id card, or Aadhar card is required as proof of identity.
- A passport, ration card, bank statement, utility bills, or driver’s license are all acceptable forms of proof of address.
- Number of your bank account that is stored in your name
Investors can begin buying stocks online once they have opened a share trading account and a verified Demat account.
Physical to electronic format (if you need physical shares converted to demat form).
Procedure to open a Demat account
You can open a Demat account with a SEBI-registered depository participant (DP), a list of which you can find here.
You must fill out the account opening form after receiving a copy of the terms of the agreement, rules and regulations, and applicable charges.
When opening a Demat account, make sure to include a nominee.
- Submit all of the relevant document copies. Address evidence, identification proof, and your PAN card are the most important documents.
- After that, a member of the DP team will call you to complete an in-person verification.
- Your DP will provide you with your Demat account details once the verification is complete.
A Demat account usually takes one to two weeks to open. When opening a Demat account, there is no requirement to maintain a minimum balance of shares.
Investors can open many Demat accounts with different or the same DP in the same name.
Procedure to withdraw money from the Demat account
Stocks are maintained in an electronic format in your Demat account; it does not handle cash transactions. You must first log in to your trading account, which is linked to your Demat account, in order to conduct the money withdrawal.