When it comes to investing, you will require stringent discipline to match your goals, and also have a strong intent to match your requirements. You will find plenty of recommendations from the RBI, several banks, investment and service providers.
However, the eligibility to invest in the first place and the efficiency which the investments are made and managed will depend on the following factors:
Bank account: Most investment products will require payments and receipts that will need to be routed through a banking system. In most cases, cash as a form of payment is often regulated. However, the cash amounts are often accepted to certain limits. Other products such as mutual funds do not accept checks that are issued from outside accounts. In other words, any capital market transactions made are only routed through the investor’s bank account. Any dividend, interest, maturity redemption checks are made out to the investor’s name, wherein which a bank account will be required to process it. Additionally, the direct transfer of funds or even modes such as the NEFT and RTGS systems allow a transfer of funds from the account of the remitter to a recipient only.
Permanent account number: This alphanumeric identity needs to be furnished and produced at the time of commencing any financial transaction. Whether it is opening a bank account or a demat account, making or redeeming any investments or deposits and many more activities, you will be required to furnish the PAN number. However, you may not have to provide this number, if your transactions are below a prescribed value for certain products. In the event a PAN is not available, you will need to make a declaration in Form No.60 under the Income Tax Rules 1962, wherein which particulars of the transactions and proof of your identity and address will be required.
KYC norms: Under the PML Act 2002, you would be required to provide your identity details in order to make financial transactions. This is done under the Know Your Customer (KYC) norms. With this, banks, depository, participants and other similar institutes and financial intermediaries will conduct this compliance process, the first time an investor makes a transaction. If the KYC procedure has already complied with any capital market intermediary, the acknowledgement can be used to invest in others.
Demat account: Any securities that have been purchased or going to be sold will be held in a dematerialized or electronic form, known as the demat form. Certain investments such as shares, debentures and government securities will mandatorily require you to open a demat account. Other investment products such as mutual funds and small saving schemes can also be held in this account. Investors can open a demat account with any depository participant that is associated with the NSDL or the Central Depository Services Ltd (CDSL).