A Demat account is an indispensable thing to have if you want to trade in the stock market. This kind of an account is meant to store your shares, bonds, mutual funds, government securities and more. Demat or dematerialisation has simplified the whole stock market trade experience by eliminating physical share certificates and replacing them with electronic form of securities. Here is more on what is Demat account and how it works.
– Central Depository: The two depositories in India are – the National Securities Depository Services Limited and the Central Depository Services Limited. The central depository keeps all your shareholding information on your behalf in a similar way that the banks do.
– Depository Participants: An investor can have access to their central depository with the help of their depository participants (DPs). The DPs can be a financial institution like a bank or brokers or organisations that provide Demat services.
– Unique ID: Every Demat account gets a unique number for identification. This number can be used to carry out transactions and for companies to identify you in order to credit shares to your account.
– Hold Portfolio: Since the Demat account keeps a record of all your securities and investments, you can take a look at your portfolio at one go. Every time you conduct a transaction, whether buying or selling shares, your list is automatically updated.
How to Open a Demat Account:
– The first step is to fill out a form for opening the Demat account. Submit it with the required documents like PAN card and residential address and a passport-sized photograph.
– Next, you will be given a copy of the list of the rules and regulations, various terms and the charges that you will need to pay.
– During this process, a member of the Depository Participant (bank person or broker) will contact you in order to cross-check the details you have provided for opening the account.
– As the application process progresses, you will be provided with a client ID or account number that can be used to access the details of your new account.
– Once the account starts functioning, the account holder may have to pay a certain fee to maintain the account or while converting physical shares to electronic form. Different DPs charge different fees as per their norms.
– When you open a Demat account, you absolutely have no worries about keeping a minimum amount of shares. You can open an account with no shares in it.
So if you were wondering what is Demat account, this should answer your question. You can now open an account with confidence and carry out your stock and other investments smoothly.