Demat is a short form of Dematerialization. Open of demat account is mandatory for investment in the Indian share market and holding them safely in digital mode. We are here to help investors open demat & trading accounts on the same day of document processing (10-15 minutes). So let us understand everything about demat and trading accounts.
Why Demat Account?
Why a Demat account is essential is an important question because it’s the first step towards investing in the stock market. To put it another way, an individual cannot trade in shares and securities unless he has a DP-A/C.
Therefore, the primary requirement to start trading or investing in the stock markets is to have a DP account.
Any individual who is holding shares in the form of a certificate i.e. physical form also needs DP-A/C to convert them into electronic form before transacting in them.
Now we shall learn the meaning of the Demat account.
What is the Demat Account?
A Demat account is an account where the shares and securities, government securities, mutual funds, electronically traded funds, etc. are held in electronic form. Another term for DP-A/C is a dematerialized account.
It is very similar to a bank account. Like for example, the bank holds an individual’s money in the account. Similarly, a DP-A/C holds the shares and securities in the account. Every purchase and sale of shares gets credit or debit to the DP-A/C. Therefore, it is compulsory for everyone who wishes to trade in shares and securities to proceed with D a/ c.
Before looking at the procedure to a DP account. Let us see some of the benefits of a Demat account.
Benefits of Demat Account
- With a Demat account, the shares get security and privacy of the highest quality.
- The Demat account helps in the easy maintenance of the account.
- The facility of electronic settlement in DP-A/C makes the process simpler and faster.
- By having a DP account, an investor can buy and sell any quantity of shares.
- It eliminates the risk of theft or any kind of loss.
- With the help of the Demat account, the shares and debt instruments can be traded in the same account.
- With a Demat account, an investor can invest any amount in any shares at any time.
- After understanding the benefits of a DP account, it is important to know where an investor can proceed to open his DP-A/C.
Where to Open a DP-A/C?
SDL and CDSL are two organizations that have the authority to proceed with a Demat account. In fact, they are known as depositories. Still, a retail investor cannot reach either NSDL or CDSL to proceed a DP-A/C directly. Instead, they have to open their DP-A/C via intermediaries, also known as Depository Participants (DPs).
The depository participants are famous stockbrokers or brokerage houses. Furthermore, investors can reach them and proceed with their DP-A/C.
Who are the Depository and Depository Participants?
As we read above, there are two depositories in India i.e. NSDL and CDSL. NSDL was set up in 1996 and CDSL in 1999. They have the authority to maintain the shares and securities in electronic form.
They also look after the process of de-materialization. Furthermore, as per the statistics, these two depositories have dematerialized more than 2000 crores of physical shares into electronic form. On the other hand, the organizations in the financial services sector, the banking sector are eligible to become the depository participants.
Still, they can become DPs only after they get clearance from Depository and Securities and Exchange Board of India (SEBI). Few examples of depository participants is Motilal Oswal Financial Services Ltd
Now moving ahead, let us have a look at the procedure of Demat account.
Procedure to Demat Account Online:
The following procedure will help an individual in successfully opening a Demat account.
Firstly, visit the depository participant or its website with whom you want to proceed the DP-A/C. The depository participant can be a broker, bank or any agent who acts as a link between the depository and the investor.
Next, you need to fill the Demat account procedure form. The following documents must be compulsorily attached with the DP account procedure form.
-> PAN card.
-> Any identity proof like a Passport, Aadhar Card, Driving license, Voter ID card, etc.
-> Any residence proof like Aadhar card, Voter ID card, Ration card, etc.
-> Passport-size photo with self-attestation
-> You can open demat & trading by online click here
If you need a corporate Demat account, following additional documents are compulsory for submission
-> Photograph, proof of identity, proof of address, PAN number, and DIN number of the directors
-> Balance sheet copies for the last two financial years
-> Copy of the shareholding controls
-> List of authorized signatories
-> Copy of the resolution for investment in securities
-> Copies of Certificate of Incorporation, MOA, and AOA
3. In the next step, the investor and the depository participant shall enter into an agreement. The agreement will bind them by certain rules and regulations. The depository participant will give a copy of the agreement to the investor.
4. After signing the agreement, verification of the documents is done. This process takes around 10-15 days. After a successful verification, the online Demat account number is given to the investor. Now, all the transactions about shares and securities shall be done via the DP-A/C. The DP-A/C is also known as BO ID i.e. beneficiary owner’s identification number.
5. Once the opening of DP-A/C is complete, the investor can keep track of transactions and holdings in the portfolio. The account of the investor gets automatic updates whenever any transaction takes place.