If you want to start trading, you need to open a Demat account. A Demat account makes holding securities and shares easy for investors. It converts the physical form of share certificates to electronic form. Through a Demat account, you can have access to your shares at any time of the day, anywhere.
Read on to know how to open a Demat account online easily.
Investors can open a Demat account by following the simple process mentioned below:
The first step involves you finding your preferred depository participant. A Depository Participant is a registered stockbroker of an organisation (depository) that holds the securities of investors. Top DP services are offered by stockbrokers, banks (HDFC, Axis bank, etc.), and online investment platforms (Groww, Scripbox, etc.). Select the one that matches your requirements and preference.
Next, visit the official website of the depository participant you just selected. You will find the Demat account opening form that you need to fill out carefully. Also, don’t forget to assign a nominee for the account. Remember that some DPs offer both online Demat and trading accounts.
The application process will also require your ‘Know Your Customer’ or KYC details. For this purpose, submit scanned copies of the original documents. It includes proof of address, identity proof, bank account statement, etc. When you have all the documents with you, it avoids unnecessary delays.
After submitting the application form and the necessary documents, you must initiate the verification process. It is a mandatory process known as the ‘In-person verification process.’ It can be either done in person or online, depending on whether DP calls you at its office or not.
After completing the verification process, the depository participant will ask you to sign a contract to complete the opening process of a Demat account. The agreement will contain details like the responsibilities and rights of both investors and DP. So, after you read it carefully, sign the document.
Once your application gets approved, the depository participant will allot you a BO ID number to give you access to your account.
For a hassle-free experience, make sure you have all the documents mentioned below along with you during the opening process of the Demat account:
Earlier banks used to charge Rs. 700 to Rs. 900 for opening a Demat account. But now, many depository participants either charge a very nominal fee or offer a free Demat account.
Here are the benefits of opening an online Demat account:
Investors can easily access their investment details in their online Demat account using the net banking facility. For this purpose, they can use their computer, smartphone or a tab.
With the help of a Demat account, investors can buy and sell their shares instantly. This is mainly because your securities will be stored in an electronic form, saving you the time of accumulating physical certificates in one place.
There are many risks involved in physical securities; they could get misplaced, stolen, or damaged. Additionally, fake securities and bad deliveries involve other risks. But one can rule out all these possibilities by opening a Demat account.
There are four must-know points about opening a Demat account to keep in mind to avoid future discrepancies. Let’s check them out:
At any point in time, if you want to close your Demat account, you can do so as well. The next section tells you how to close your Demat account.
As for some Demat accounts, there are some charges involved. So, if your Demat account has been inactive for a long time, you may close it altogether. The process involves the following steps:
Follow the opening process of the Demat account carefully to effectively trade in financial instruments, like stocks and bonds. It will make the process effortless, and you could buy or sell securities using the electronic mode.
As per the Securities and Exchange Board of India (SEBI), the stock market regulator, it is compulsory to open a Demat account for this purpose. However, if you’re looking to trade in futures and options, you may not open a Demat account.
Under the Depository Act of 1996, SEBI has made it mandatory to dematerialise physical certificates to carry out trading. This is mainly because now all shares are available in electronic form. So it is better to deal in a common mode for convenience.
After you have opened an account with your preferred depository participant, you can buy or sell shares online by providing your details to it. Also, after purchasing the shares, convey the information to your broker so that they can re-credit your account.
A debit transaction fee is charged at the time of debit of securities. In other words, holders pay it whenever they withdraw shares. It may vary, but some brokers charge a fee of Rs. 9.50 per transaction. In contrast, some charge 1% of the transaction amount.
There are two types of Demat accounts — Normal Demat account and BSDA Demat account. The latter was introduced to benefit account holders by reducing maintenance costs. So, those investors whose investment amount is not substantial can choose to open a BSDA Demat account.
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