A demat account is similar to a bank account. In a bank account, we hold money electronically, but in a demat account, we electronically hold shares. According to the Securities and Exchange Board of India, a demat account is mandatory for trading shares in India. In the last few decades, this concept has solved many problems of brokers and investors. Those investors who used to get burdened with the reams of stock certificates, for them, demat account is a necessity. By using a demat account, you can easily buy or sell stocks of different companies.
Moreover, a demat account is a convenient and safe means of holding securities just like a bank account. You don’t have to worry about counterfeit shares, postal delays and mutilated share certificates by using a demat account. Today, almost all of the stock trading occurs using the demat mode of shares.
Important things to remember
Here are the few things that you must know while opening a demat account:
• Pan Card
• Charges applicable, varies from DP to DP.
• Annual maintenance fee
• Transaction fee
• Account opening fee
• Custodian fee
How to Open a Demat Account?
Dematerialization starts with an opening of demat account. Hence, below-mentioned is the procedure of opening a demat account:
• Step-1: To open a demat account, you are supposed to approach a DP of your choice and fill up an account opening form. The list of depository participants is available on the websites of depositories. Also, a DP should be registered with the Central depository services Ltd and National Securities Depository Ltd.
• Step-2: Along with the account opening form, you must submit all supporting document for identity and address proof.
• Step-3: You need to sign an agreement in the prescribed format that gives the detail of rights and duties of investor and DP. Also, you are entitled to receive a copy of that agreement.
• Step-4: Further, the DP will open an account and will give you the demat account number, which is also called as beneficial owner identification number. All your investments will be credited through this number.
As we know, majority of stock trading take place through a demat account, therefore, it is important that an individual dealing in stocks has such an account. Importantly, the minimum age for opening a demat account should be 18 years. So, if you are planning to invest in shares, you can easily open a demat account through various stock broking firms online which offer a variety of demat account facilities for lifetime.