All about Demat Account

A Demat account is something similar to a bank account. The only point is, instead of funds held in your bank account, Demat endures your securities – a sort of shares, bonds or debentures.

If you want to acquire securities in the stock market, you first need a Demat account.

Here’s everything you want to understand about Demat Account.

A Dematerialized or Demat account is an automated account where your securities are maintained, working as a choice to physical certificates.

To purchase and exchange securities in the Indian stock market, it is necessary for you, as an investor, to open a Demat account by a Depository Partner.

What are depositories and depository partners?

Depositories are companies that hold your bonds electronically and also help to transact. The two depositories filed with SEBI are National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL).

Depository Partners (DP) act as intermediaries between depositories and investors. To avail the help of a depository, you need to go by a DP. The account you necessitate to have with a DP is related to as a Demat account.

What are the benefits of a Demat account?

  • Your shares and securities are securely locked
  • The transaction cost is significantly lesser compared to the physical part as you don’t have to give stamp duty
  • Convenient and fast for electronic records
  • Associated paperwork in case of transfer of securities
  • Risks related to physical certificates, such as thefts, non-delivery, and fake documents, are forbidden
  • Sell any number of shares you want.
  • Invest online

What are the fees linked with starting a Demat account?

Most DPs do not impose a fee to open a Demat account. Some offer refundable account opening costs, while others have a fixed price.

There are also other costs such as performance fee, annual support fee, and costs for changing shares from natural to electronic format – in case you need solid stocks to be converted to Demat form.

How do you open a Demat account?

  • You can start a Demat account with a depository participant (DP) registered with SEBI
  • Once you get the copy of the terms of the agreement, the rules and regulations, and the charges that will apply, you require to fill in the account opening form.
  • Make sure you attach a nominee when starting a Demat account.
  • Present all the required copies of documents. Chiefly address proof, ID proof, and your PAN card.
  • The DP staff will then reach you to conduct in-person verification
  • Once the verification is enough, you will get your Demat account features from your DP
  • It typically gets one to two weeks to open a Demat account. There is no mandatory requirement to maintain a minimum balance of shares when opening a Demat account.
  • You can open multiple Demat accounts in the same name with different or the same DP.

What are the KYC norms to be fulfilled to open a Demat account?

To prevent fraudulent activity, a customer identification process known as KYC has been introduced. According to SEBI, you need to fulfil KYC norms to open a Demat account.

Here’s what is needed to fill the KYC norms:

  • Verification of identity – You necessitate to have a PAN card, passport, voter id card, or Aadhar card.
  • Evidence of address –You need to have a passport, ration card, bank statement, utility bills or driving license.
  • Bank account number in your name
  • Once you open a share trading account and have a valid Demat account, you can start buying securities online.

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