Demat Account is short for Dematerialized Account. It acts as a bank where all your shares and securities are kept in a digital format. As per the guidelines of the Securities and Exchange Bureau of India (SEBI), anyone wishing to trade in stocks in India should have one.
In this article, we have listed down points about opening a Demat account which every investor should know.
This question is the first one to occur in many a mind. It’s quite simple actually. You can open one with any broker, firm, NBFC or corporate registered with either the NSDL or CSDL as a registered Depository Participant (DPs). A list of registered DPs is available at the websites of NSDL or CSDL. You will need to link your Demat Account to your bank account to make it operational; your bank account will supply money for buying shares and receiving money post sale of shares.
2. KYC Details:
It is a mandate by the SEBI that all Demat Account holders need to fulfil their KYC norms during the account opening process. These norms include:
Identity Proof: Pan Card with photograph, voter id, passport or Aadhar Card
Proof of Residence: Ration card, passport, Aadhar Card, Bank Account Statement, utility bills (telephone, electricity).
3. Cost of Operation
DPs levy some form of charge for you operating the Demat Account. You have account opening charges which depending upon the DP are sometimes levied and sometimes not. There are broking charges applied each time you buy or sell a stock. Another cost you should note is the Annual Maintenance Fee. There are other charges too such as a fee for dematerializing your physical copies of shares and other financial instruments, charges for account statements, fees for advisory services, and more.
4. Technology and Trading Platform:
You also need to make note of the trading platform and the technology used in it. A good trading platform is one which shouldn’t be down during trading hours, the user interface should be easy to understand, and loading time should be as minimal as possible. Most investors just look at the cost of opening and maintaining a Demat Account; a serious investor, on the other hand, keeps an eye on technology too.
5. Online Demat Execution
Make sure your DP offers this facility. All Demat transactions require the use of Delivery Instruction Slip (DIS). When you submit a DIS, your DP will verify it and then debit or credit the number of shares as per the details on the DIS. This is often cumbersome as you have to fill in the DIS and then submit in physically, a better and easier way is via online Demat facility where you can complete all transactions online saving precious time.
A good DP will ensure you have a great experience with them as you open and then transact with your Demat Account. Sharekhan is a good choice to go with. They are one of India’s top online brokers offer great services at minimal rates.