Demat Account: Meaning, Facilities, How To Open A Demat Account

Demat Account

Demat account is the most essential thing to invest in the stock market. It has made trading faster, easier, and secure for investors. You can hold stocks, bonds, mutual funds, government securities, and other financial securities in your demat account.

What is a demat account?

A demat account facilitates dematerialisation i.e. conversion of physical securities into electronic ones. You can hold your securities safely in a demat account. It allows you to track the credits and debits of funds and securities as you would track cash transactions in a bank account. When you purchase the shares, they get credited to your demat account. When you sell them, they get debited from your demat account.

Opening a demat account is mandatory if you want to trade in the delivery segment. However, you don’t need to have a demat account if you want to trade in the futures and options because taking delivery of shares is not required in it.

Facilities offered by a demat account

These are the facilities offered by a demat account:

Transfer of shares

Transferring shares from one demat account to another is possible. You need to fill a DIS (Delivery Instruction Slip) with all the required details to transfer the shares smoothly.

Facility to get a loan

You can take a bank loan against the securities that are held in your demat account. These securities are pledged as collateral. However, the pledged shares don’t stop you from receiving corporate benefits like bonus shares and dividends.

Rematerialisation and dematerialisation

Dematerialisation means the conversion of physical shares into electronic form. A demat account allows you to complete this process with the assistance of your DP (Depository Participant). However, if you want to get the physical shares back, you can rematerialize them i.e. convert the electronic shares into physical share certificates.

Easy access to trading and monitoring holdings

Most stockbrokers allow investors to trade and monitor their holdings via an app. As the trading app can be accessed via a smartphone, it is possible to keep track of investments from any part of the world.

Receiving corporate benefits

Corporate benefits like interests, dividends, refunds, etc. are credited directly to the demat account. Similarly, corporate actions like stock splits, bonus issues, etc. are also updated in your demat account.

Freezing Demat Accounts

Once you open a demat account, it is possible to freeze it for a particular duration. It is generally done to prevent any unwanted credit or debit when you are not using the demat account.

Speed-E Service

Instead of submitting the DIS (Delivery Instruction Slip) physically, you can avail of the Speed-E facility. Speed-E facility allows you to submit the slip electronically and makes the process much faster and more convenient than before.

How to open a demat account?

An online demat account opening procedure is followed by most DPs these days. Follow these steps to open a demat account online:

Step 1: Visit the website of DP

Go to the website of DP with whom you want to open a demat account. It is wise to opt for a DP that provides all the services and features that you require for trading.

Step 2: Fill an online form

You will find an online application form to open a demat account on the DP’s website. Fill it out with all the relevant details and submit the form online.

Step 3: Submit the necessary documents

After submitting the application form, you can submit the documents essential to prove your identity, address, bank details, and income. Submit scanned copies of original documents to process the application faster.

Step 4: Complete the verification

An in-person verification may be required after submitting the documents. If you cannot attend the verification round in person, you can opt for the online verification which is generally done via a webcam or camera of your mobile.

Step 5: Sign the agreement

After completion of the above 4 steps, the DP will ask you to sign an agreement. This agreement will contain information regarding the rights and duties of DP and an investor. Go through this document properly to understand everything.

Step 6: Get the BO ID

Upon completing all the necessary formalities, a BO ID will be sent on your registered email address. BO ID i.e. Beneficiary Owner Identification number is a 16-digit code that is unique to each investor. Save this number as you will need it to access your demat account in the future.

Documents required to open a demat account

The following documents are required to open a demat account:

  • PAN Card, Aadhaar Card, Voter ID, Passport, Driving Licence, or any other document that establishes your identity
  • Electricity bill, ration card, driving licence, or any other document that can used as an address verification proof
  • Bank passbook or cancelled cheque to verify your bank details
  • Income proof like salary proof or account statement

Leave a Reply

Your email address will not be published. Required fields are marked *

3 × four =