Open Free Demat Account
We all know about savings accounts with banks. It allows easy access to our funds while offering security from theft and mishandling. A Demat account does the same for investors. Nowadays, the Demat account is a prerequisite for stock investment.
Demat Account is an account that is used to hold shares and securities in electronic format. The full form of Demat account is a dematerialised account. The purpose of opening a Demat account is to hold shares that have been bought or dematerialised (converted from physical to electronic shares), thus making share trading easy for the users during online trading.
In India, depositories such as NSDL and CDSL provide Free Demat account services. Intermediaries, depository participants or stockbrokers – like Angel One – facilitate these services. Each intermediary may have Demat account charges that vary as per volume held in the account, type of subscription, and terms and conditions between a depository and a stockbroker.
A demat account can hold the following range of securities:
Shares
Stocks
E-gold
Bonds
Government securities
IPOs
Exchange-traded funds
Non-Convertible debentures
Mutual funds traded on the stock exchange
You can think of a demat account as any other bank account: it shows your credits, debits, balances, transaction history, and is a place to maintain your finances electronically. There is no lower limit to the value of holdings you need to have to maintain the account. You can have a zero balance when you open the account, and even during the whole time you hold the account.
What is Demat account ?
A Demat Account or Dematerialised Account provides the facility of holding shares and securities in an electronic format. During online trading, shares are bought and held in a Demat Account, thus, facilitating easy trade for the users. A Demat Account holds all the investments an individual makes in shares, government securities, exchange-traded funds, bonds and mutual funds in one place.
Demat enabled the digitisation process of the Indian stock trading market and enforced better governance by SEBI. In addition, the Demat account reduced the risks of storing, theft, damage, and malpractices by storing securities in electronic format. It was first introduced in 1996 by NSE. Initially, the account opening process was manual, and it took investors several days to get it activated. Today, one can open a Demat account online in 5 mins. The end-to-end digital process has contributed to popularising Demat, which skyrocketed in the pandemic.
Opening account to start stock market investment
Opening Demat account is the first step towards starting an investor’s journey. But to start trading, you will need a bank account, Demat account, and a trading account. A Demat account is merely a deposit account used for holding securities for the time you trade. A trading account is necessary to make real transactions. With a trading account, you can invest in a wide range of investment tools such as stocks, commodities, derivatives, and e-gold.
If you think managing three accounts for trading is cumbersome, you can opt for a three-in-one account that facilitates seamless trading. Use the three-in-one account to reduce time in switching between accounts that can cause you to lose a good a trading opportunity.
Benefits of a demat account
The technological strides made in the last few years has led to a lot of benefits to holding a demat account:
Traders can make a transaction at their convenience, making it convenient and time-saving.
There is no tedious paperwork required to register transactions.
No risk of theft, delays, or forging of physical copies of share certificates, bonds, etc. since the securities are stored in electronic form.
You have a single integrated platform for holding debt as well as equity instruments.
Automated credits made to registered demat account in case of bonus, splits, mergers, consolidations, etc.
Eliminates need for multiple communications: every stakeholder is notified of the transaction through electronic alerts removing the need to contact the company, trader, investor.
Address changes are updated with every company invested in by the investor through the Depository Participant.
One single share can be bought/sold unlike earlier when shares were transacted only in lots.
Removal of stamp duty costs which were otherwise associated with physical records of securities has led to significant reduction in the cost of trading.
Key elements of a Demat account
There are four key elements:
1. Depository
There are two authorised depositories operating in India i.e. Central Depository of Securities Ltd and National Depository of Securities Ltd. These two institutions electronically hold pre-verified shares.
2. Depository Participant (DP)
Any financial institution that is registered under SEBI can act as an agent of the Depository and conduct transactions for the in investor. Any depository service has to be Demat Account through the DP. A DP can be a financial institution, a scheduled commercial bank, a foreign bank operating in India (RBI approved), a stockbroker, a clearinghouse, a state financial corporation, a share transfer agent, a non-banking financial company, etc. SEBI assigns every DP a unique code.
3. Investor
The investor is the individual is the owner of the securities. In this case, the person holding the demat account is the investor.
4. Unique ID:
Every demat account has a unique 16-digit identification number which ensures smooth and transparent processing of securities.
Facilities available with a demat account
A demat account is not only used for holding your financial securities; it also serves many other functions:
1. Investment transfer
The account holder can transfer all or part of their holdings to another person. The account holder only needs to fill a Delivery Instruction Slip with the accurate information and the seamless transfer of shares or other holdings can be carried out.
2. Dematerialisation
The investor can choose to convert their physical share certificates or other physical records of securities into electronic form through the process of dematerialising. To do this, the account holder has to fill out the Demat Request Form (available with every DP) detailing the information of the physical certificates and submit it along with the original certificates to the DP. Since every type of security has a different International Securities Identification Number (ISIN), the investor will have to separate forms for every security.
Once the DP verifies all the documentation, the DP updates the investor account, and the Depository makes a note of the changes.
Similar to dematerialising, a demat security can be processed into a physical record through rematerialising. For this, the investor needs to fill out a Remat Request Form with the ISIN.
3. Collateral for loan
The value of the security holdings can be used as collateral while applying for a loan.
4. Corporate actions
The securities in the demat account are linked with the company. In such a case, whenever there is a split in equity, a bonus is issued, or the company takes any other step concerning the shares or other securities, the investor is notified, and the security status is automatically updated, thanks to the centralised system. A demat account makes it easy for the investor to keep an eye on their investments.
5. Freeze the account
Available only when you have specific securities (and not zero balance) in your demat account, this facility can be used when the investor expects any untoward activities to occur. You can freeze your demat account similar to how you block a bank account or a credit card.
6. E-facility
To enable swift transactions, the NSDL allows the investor to make a transaction and then submit the e-slip to their respective DP.
Types of demat account
There are three types of demat accounts which can be opened in India, depending on the residential status of the investor:
Regular Demat account: This type of Demat account is available to all investors in India. You can approach any depository participant (DP) of your choice to open a regular Demat account. The difference between regular Demat account with the other types is that it doesn’t offer additional facilities like international fund transfer.
Repatriable Demat account: NRIs who hold a non-resident rupee account (NRE) can open this type of Demat account. This account allows the international transfer of funds.
Non-repatriable Demat account – non-resident Indians with a non-resident ordinary rupee (NRO) account can open this type of Demat account. However, this does not allow for international transfer of funds.
How to open demat account?
Now that you know the function and benefits of a demat account, you may be inclined towards opening a demat account. Conveniently enough, opening a demat account is easy. It can be done in two ways: offline and online. Let’s take a look at how to open a demat account offline.
1. Select a Depository Participant
Once you have compared the services and benefits offered by different DPs, you can finalise the most suitable DP for your needs.
2. Fill application form
You will need to fill out an application form for opening a new demat account. Along with this, you will need to submit a list of KYC documents such as Identity Proof, Address Proof, PAN card, Bank details, and your personal details.
3. Verification process
You will be given a list of rules and regulations to ensure ethical and legal trading, and to clear any doubts you may have regarding holding a demat account and the different functions it serves. The DP will conduct an in-person verification of you and your KYC documents. You will have to pay any necessary fee associated with opening a demat account. The fee depends on the existing policy of the DP. The fee varies from DP to DP.
4. Final approval
Once your documents are verified, and the final formalities are completed, your new demat account will be opened. You will also be given the Unique Identification Number for your account.
How to open demat account online?
There is a more convenient way of opening a demat account. Equipped with only a computer/laptop/tab/smartphone, you can open your demat account in a few minutes.
Here are the steps to open a demat account online:
Head to the official website IBWC Wealth (www.ibwcwealth.com) > Sign Up > Trading
Fill out the simple lead form asking for your name, phone number and city of residence. You will then receive an OTP on your registered mobile number.
Enter the OTP to get to the next form. Fill in your KYC details such as date of birth, PAN card details, contact details, bank account details.
Your demat account is now open! You will receive details such as demat account number on your email and mobile.
An investor can have multiple demat accounts. These accounts can be with the same DP, or with different DPs. As long as the investor can provide the required KYC details for all applications, they can open multiple demat accounts.
Eligibility of Investor
Any registered resident of India with the necessary documentation to prove it can open a demat account in India. With certain restrictions under SEBI, even non-resident-Indians can open a demat account.
A demat account can have up to three account holders; two joint account holders and one main account holder.
Just like with bank accounts, there is a provision to nominate a beneficiary in case of death. In case of joint account holders, each account holder is encouraged to nominate a beneficiary. The nominee can be changed or updated as per the wishes of the account holder.
List of accepted KYC documents –
In order to open a demat account, you will require certain documents. You will need one proof of identity and one proof of address. Here is a list of accepted documentation that can serve as:
Proof of identity
passport
driver’s license
voter’s ID
IT returns
Verified copy of electricity/phone bill
PAN card
Bank attestation
A photo ID card issued by a central or state government body
ICAI, ICWAI, ICSI, bar council etc, issued identification card with photograph
Proof of address
Voter’s ID
Ration card
Passport
Driving license
Bank passbook/ bank statement
Leave and license agreement/ agreement for sale,
Verified copies of residential telephone/ electricity bills
Self-declaration by High Court/Supreme Court judges
A photo ID card with address issued by a central or state government body
ICAI, ICWAI, ICSI, bar council etc., issued identification card with photograph and address.
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