How to open a Demat Account? What are its benefits?

Posted by aarav badhe on May 27th, 2019

Demat Account functions are similar to a bank account. The only difference being, a Demat Account holds securities such as shares, debentures, bonds, mutual funds, etc. instead of cash. It is an alternative for physical certificates. You can use a Demat Account while trading online. In case you go for intraday trading, open a trading account as well. Indian market demands both.

How to open Demat Account? What are the requirements? You will learn all these in the following sections.

Know Your Customer (KYC) Documents:

Whether you open Demat Account online or offline, you need to submit or upload the following materials –

• ID proofs – PAN, passport, voter ID, and Aadhaar
• Address proofs – passport, bank statements, utility bills, ration card, and driving license
• Bank details

Why open a Demat Account?

• You do not have to worry about mutilated certificates, postal delays, or counterfeit shares
• It is a convenient and safe way to hold your securities

What is the Demat Account opening process?

When it comes to Demat Accounts, there are two terms you should be aware of – depositories and depository participants (DPs). The SEBI registered DPs in India are – the National Securities Depository Limited (NSDL) and the Central Depository Services Limited (CDSL). They hold your securities in electronic form and allow you to make transactions. These DPs are agents who work as an intermediary between the depository and investors.

To open Demat Account, the process is simple and hassle-free:

• Select a Depository Participant. They could be any financial organisations such as banks, brokers, custodians, etc. who act as an agent to the depository
• Fill the account application form. You could either do it physically or fill it online. Submit the necessary documents
• Demat Account requires in-person verification. This is not the case with NRIs or any foreign expat
• The DP then provides you a unique account number or ID which you can use for transactions and to check online statements

When you open Demat Account, do not forget to add a beneficiary. Opening of Demat Account takes one to two weeks. The best part about Demat Account is you can open multiple ones with different DPs, and there is no requirement of minimum balance share.

What are the charges associated with Demat Account?

Once you have opened a Demat Account, the DPs send the terms and conditions along with the applicable charges. Most DPs usually do not charge a fee. A few other either have a fixed rate or have refundable fees. Apart from the opening costs, Demat Account has transaction costs, yearly maintenance fee, brokerage charges, and conversion costs in place.

What are the benefits of the account?

The benefits of Demat Account are as follows:

• No worries about the safety of shares, bonds, debentures, etc. They are secure
• Transaction costs are lower than dealing with physical counterparts
• It is easy and convenient to invest in online securities
• You can sell as many shares as possible, even one is fine
• Demat Accounts eliminate the threat of theft, fake certificates, forgery, wrong delivery, etc.
• Electronic settlements are done in a jiffy

Transferring securities are faster owning to less paperwork