7 Things You Should Know Before Apply For A Demat Account

On June 8, 2018, the Securities and Exchange Board of India (SEBI) circulated the amended Obligations and Disclosure rules for the dematerialisation of securities. The circular said that companies are allowed to process the transfer requests of securities only if these are held in the digital form with a stockbroker/depository participant, except in the case of transmission or transposition of securities.
Demat Account

1. What is a demat account, and how to avail of demat services?

Dematerialised account, abbreviated demat account, is the online repository to hold your securities. In India, you require a demat account to invest in financial securities like stocks, equity, exchange-traded funds, government securities, IPO shares, etc., compulsorily.

A Depository Participant (DP) is an authority offering demat services to investors on behalf of SEBI-authorized organisations called depository. These DPs can be registered with any of the depositories or both of the depositories. The two depositories in India are Depository Participant (DP) - the National Securities Depository Limited (NSDL) and the Central Depository Services Limited (CDSL).

2. How to start trading online? Is a demat account the only requirement?

To invest in the Indian stock market, an individual requires a demat account, a trading account and a bank saving account. All three accounts work together to use the online trading system.

When you want to buy/sell securities in the stock market, you can execute a trade using your trading account. In case of buy trade, your trading account will use the money available in your registered savings account. And in case of a sell trade, your savings account will be credited with the amount.

3. What facilities are included in demat services?

With the demat account, depositories provide the following facilities:

  • A safe and convenient online storage to hold securities with the facility of immediate transfer.
  • The low-cost investing process with reduced transaction cost and minimal documentation requirements.
  • No risks of faulty delivery, delays, fake securities, thefts etc.
  • It allows trading even one share, thus elimination of the odd-lot issue. Hold all your investments of different market segments in a single account. Nomination facility that supports the transmission of securities.
  • Dematerialisation facility - change paper-based shares into electronic format and Rematerialisation facility - change the electronic form of shares into paper format.
  • Quick update of changed address with all companies in which you hold securities. You just need to correspond with your DP instead of each of the companies separately.
  • Automatic receiving of bonus, right issues, dividends and all other benefits directly into the demat account.

4. What is the account opening process?

First, approach the selected DP and fill in the demat account opening online form. The online form must be supported by copies of PAN card, ID proof, address proof. If you are opening a demat cum trading account, the documents required include the income statement also.

For the quick verification process, carry original documents as, during the verification process, it will be asked for showcasing to the authorised official of the DP.

Sign the agreement bearing details of rights, duties and charges. Soon after the successful process, you will receive your unique account number, called Beneficial Owner ID. Keep login credentials safely with you only to avoid any unauthorised transaction.

5. What are the safety measures to keep the demat account safe and secured?

  • Assess your demat account statement periodically to find discrepancies, if any and to check that all the recorded transactions were made by you only.
  • Check the number of securities traded to confirm that it is the same quantity as per the trade you executed.
  • Most securities get credited within T+2 days (Transaction date+2 days) to your demat account. You should follow up with your broker if there is any delay.
  • Do not leave Debit Instructions Slip (DIS) with the broker. The depository's online transfer facility EASIEST is the best way to avoid any fraud.
  • Whenever you are on break from trading, you can utilise the facility of freezing your demat account to ensure that no debits can occur from your demat account. Your demat account will be open to receive all your corporate benefits such as bonuses, dividends, interest, right issue, etc. It is an important facility to keep your demat holdings safe in your absence. 

6. What are the types of demat accounts available for investors in India?

Three types of demat accounts are regular demat account for Indian residents, repatriable demat account for NRIs, and the third is the non-repatriable demat account, also for NRIs. In a repatriable demat account, funds are free to move abroad, but a non-repatriable account does not allow transferring funds abroad. Whatever you earn from this account, you can not transfer outside of India.

7. Are there any account opening charges to open an online demat account?

In the interest of investors, SEBI has eliminated the account opening charges for Basic Services Demat Account (BSDA).

However, there are other demat charges, including:

- Annual Maintenance Charges depend on the type of demat account and services you want.

Transaction charges to be levied on the debit transaction.

- Dematerialisation/Rematerialisation charges if you want to convert your paper-based shares into dematerialised form, or vice versa.

- Pledging fee in case of demat holdings used for margin trading.

- Custodian charges if the company has not paid it in advance.

- Delivery Instruction Slip (DIS) fee when you want to change your DP.

- Consolidated Account Statement (CAS) and update minimal charges.

- Now, you can access the stock market with your online demat account easily.

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