It has become mandatory today to open a Demat (Dematerialized) account for those who actually want to invest in the stock market. This account maintains your securities in a digital mode, ensuring that the transactions are easy and safe. This article contains a step by step guide that will assist you to open a Demat account that will usher you in the investment market.
Table of Contents
Understanding the Basics
A Demat account is similar to a bank account where you store your securities like equities, bonds, government instruments, mutual funds and Exchange Traded Funds (ETFs) in a digital form. This reduces the vulnerability involved with actual certificates, for instance; loss, theft or even damage. It also makes the buying of securities, selling and transfer of securities easier as compared to physical certificates.
Steps to Open a Demat Account
The numerous levels involved in opening a Demat account are as follows.
1. Choosing a Depository Participant (DP)
The first step of opening a Demat account includes choosing a Depository Participant (DP). DPs are also referred to as Participant Institutions that are incorporated with the central depositories, including the NSDL or CDSL. Banks, brokerages and other financial institutions act as DPs for most of their clients. When selecting your DP, assess them by aspects such as their popularity, cost of service, annual maintenance fees for the DPT and customer service respectively.
2. Documentation Required
To open a Demat account, you need to provide certain documents for identity and address verification. Typically, the following documents are required:
1. Proof of Identity (POI): PAN card (mandatory), Voter ID, Passport, Driving License, or Aadhaar card.
2. Proof of Address (POA): Passport, Voter ID, Ration card, Driving License, Aadhaar card, or utility bills (not older than three months).
3. Proof of Income: This is often required if you wish to trade in derivatives. It can include a copy of your latest salary slip, Form 16, or IT returns.
4. Bank Account Proof: A cancelled cheque leaf, passbook, or bank statement.
Ensure all documents are self-attested before submission.
3. Online and Offline Application Process
Opening of Demat account can be done either through the Internet or by visiting the branch in person. The following is the breakdown of both the processes:
1. Online Process:
- Visit the DP’s website and fill out the online account opening form.
- Upload scanned copies of the necessary documents.
- Complete the e-KYC (Know Your Customer) process using Aadhaar-based OTP verification or video KYC.
- E-sign the application using Aadhaar OTP.
2. Offline Process:
- Visit the DP’s branch or request an application form.
- Fill out the form and attach self-attested copies of the required documents.
- Submit the form to the DP’s office.
- You should provide original documents for verification.
4. In-Person Verification (IPV)
As a clarification of the KYC process, DPs are obliged to complete an In-Person Verification (IPV). In the case of online applications, this can be done through a video call. For the offline application, the applicant may need to go to the nearest branch of the DP, or their representative may visit the applicant.
5. Receiving Your Demat Account Details
After going through the application processing and verification stages, one will receive the Demat account number, commonly referred to as BO ID, or beneficiary owner identification number, plus other details. This usually takes several days up to a week.
6. Linking Bank Account and Trading Account
To avoid all the complications in the transaction process, one should open an account with a bank and link it with the Demat account. Many investors blinding their Demat account with a trading account through which they are able to trade in securities. In addition, several of the DPs provide for a single account: the trading account, bank account and Demat Account all rolled into one 3-in-1 account.
7. Fees
Be aware of the various fees associated with Demat apps:
- Account Opening Fees: Some DPs may charge a one-time fee for opening the account.
- Annual Maintenance Charge (AMC): A yearly fee for maintaining your account.
- Transaction Fees: Charges for buying or selling securities.
- Dematerialisation Fees: Fees for converting physical certificates to electronic form and vice versa.
Conclusion
The process of applying for a Demat account is quite simple as long as you strictly adhere to the relevant procedures and prepare all the necessary documents. Therefore, ascertain correct documentation, select a suitable DP, and comprehend all the costs connected with electronic trading apps. One is ready to experience the new trading environment. Going for dematerialised securities is not only a secure way of holding certificates but also brings a lot of convenience and is consistent with the technological progress in the field of financial markets.
