What is a Demat Account?
You may have heard the word ‘Demat Account’ on more than a couple of occasions in the last few years. In the event that you’ve wondered about what a Demat Account is, let us clarify it for you. A Dematerialised Account or Demat Account as it is commonly known is an account that is used to save share certificates and other securities that exist in an electronic format. The sole purpose of opening a Demat Account is to hold shares that have been purchased or dematerialised. This makes share trading simple for the account holder while trading online. There are various benefits of opening a Demat Account. Namely, Security of shares, no forgery or theft, seamless trading and transfer, lower cost and multiple access points.
What is Dematerialisation?
Dematerialisation is the process where physical shares are converted into electronic form. When you convert the shares into electronic form, it makes it easier to maintain and access them from anywhere around the globe. The purpose behind the process of dematerialisation is to relieve the investor from having to hold physical share certificates and encouraging a consistent tracking of the shares.
Now that you know what a Demat Account is, the next question that comes to your mind is how to open Demat Account. Well, that is not very complicated either.
In India, depositories such as NSDL and CDSL offer Free Demat Account services through various intermediaries / Depository Participant / Stock Broker. The charges for the account may vary depending on the terms and conditions of the depository participant and the stockbroker. Opening a Demat Account is very easy, you just have to select the right depository and fill the form in time. All of this can be done if you follow a few easy steps. Below is the procedure to open a Demat Account.
How To Open Demat Account?
Step 1:First select where you need to open a Demat Account and afterward select the Depository Participant you need to open Demat account with. These services are commonly available at most brokerages and monetary institutions.
Step 2: You will then come across a form to open an account. Fill the form and submit it on time along with all the necessary documents and a passport-sized photograph. You will also require your PAN Card to complete the process. Make sure to carry all the authenticpapers for verification.
Step 3: You will be provided with a set of the rules and regulations and also with the terms of the agreement and the fees that you will have to pay. Go through the details properly.
Step 4: A personal validation is an important part of the process. A member of the Depository Participant’s staff will get in touch with you to authenticate the information you provided in the account opening form.
Step 5: Once the verification is complete and the application is processed, you will be provided with a Demat Account number and a client ID by the Depository Participant. With the help of the account number and ID provided to you, you can access your Demat account online anytime and anywhere.
That is how easy it is to open a Demat Account.Demat Accounts don’t require an applicant to be a shareholder i.e. they are zero balance accounts, you do not require any shares to open a Demat account. But as an account holder, you should know that you will need to pay some fees like the annual maintenance charges, opening charges, safety charges (custodian fees) transaction fees on a regular basis. These fees may differ based on the service provider you choose. And in addition to the other fees, Depository Participants also charge a fee to convert the shares from physical to electronic form and vice-versa. Also, you can open a Demat Account without possessing any shares and can maintain a zero balance in your account. Open your Demat Account today and start trading.