A Demat account (short for Dematerialized account) is an account to hold financial securities (equity or debt) in electronic form. In India, Demat accounts are maintained by two depository organisations, National Securities Depository Limited and Central Depository Services Limited. A depositoty participants , such as a bank, acts as an intermediary between the investor and the depository.
The Demat account number is quoted for all transactions to enable electronic settlements of trades to take place. Access to the Dematerialized account requires an internet password and a transaction password. Transfers or purchases of securities can then be initiated. Purchases and sales of securities on the Dematerialized account are automatically made once transactions are confirmed and completed.
Every news on the rise or fall in stock market arouses the interest of many. And the first step to take the plunge is to open a Demat Account.
A Demat Account is the medium through which one can hold stock market shares & other securities like Initial Public Offerings (IPOs), bonds, government securities, mutual fund units and exchange traded fund (ETFs). A Demat Account not only assures security of all such financial investments, but also facilitates ease of their handling & maintenance.
How to open a Demat Account:
- Decide on a Depository Participant (DP), which is any authorized bank, financial institution or broker, with who you want to open a Demat Account with. The choice of a DP should ideally depend on the brokerage charges, annual charges &leverage provided.
- Submit a duly filled account opening form and KYC form. Along with this, you will need to attach copies of –
- PAN Card
- Residence Proof
- ID Proof
- Passport-sized photographs
Do carry original copies of all for verification purposes. You will also need to give a cancelled cheque for dividend bank details.
- You will then need to sign an agreement that will mention all the rules, regulations and rights associated with holding a Demat Account. Read them carefully and do not hesitate to clear all your doubts. When this is submitted to the DP, it will be signed by an authorized person and a copy of the same will be given to you.
- When the account is opened, you will receive a unique Client ID from the DP. This, along with other details, will help you get access to your Demat Account online.
- You will also be given instruction slips by the DP, which will be of use for depository services like transfer, purchase, etc.
Note that a Demat Account does not require any ‘minimum balance’ of shares or financial securities to be held in it. Also, you can hold more than one demat accounts linked to a single PAN. However, not with the same DP.
How to open a Demat Account online:
A request to open a Demat Account with any DP can be applied for online as well.
- Visit your chosen DP’s website
- Click on ‘open demat account tab and submit the following details
- Email ID
- Mobile Number
- One-time password (OTP) that you will receive
- You will receive communication from the DP to get in touch with you for completing the above mentioned formalities and opening a Demat Account
Your demat service provider needs to give you the following details:
- DP ID
- Beneficiary ID or Demat Account number
- Power of Attorney (POA) number
These are especially helpful if you want to apply for an initial public offer (IPO).