A demat or dematerialized account holds your investments in an electronic form. You may hold instruments such as shares, bonds, mutual funds, government securities, and Exchange-Traded Funds (ETFs) in these accounts.
If you want to invest in financial instruments, you need to have a dematerialized account. These accounts make the entire procedure to trade quick, simple, and secure.
Steps to open a demat account
The procedure to open a demat account is quick and simple. There are two depositories in India, namely the Central Securities Depository Limited (CDSL) and the National Securities Depository Limited (NSDL). You may choose to open an account with either of these depositories.
- Choose the Depository Participant (DP); most financial institutions and brokerage service providers are registered DPs
- Fill the account opening form complete with a photograph and photocopies of identity and address proof
- The DP, at this point, will provide you with all the rules and regulations, charges, and agreement for your evaluation
- An in-person verification wherein a representative from the DP will contact you to verify the details you provided
- On successful processing, the DP provides the account number and client ID, which may be used to access your account online
It is possible to hold more than one dematerialized account. However, you need to submit the Know-Your-Customer (KYC) documents for each account you open. When you want to know how to open a demat account, it is also recommended you check the documents that need to be submitted. Here is the list of some common documents that are needed:
- Identity proof
- PAN card
- Address proof
- Bank account statement
- Income proof
Features of a demat account
- Share transfer
You may transfer your shareholdings using the Delivery Instruction Slip (DIS) enabling quick and easy trading. The DIS includes all the relevant details related to the transfer of securities.
- Dematerialization and rematerialization
Using a demat account, you may convert your physical certificates to an electronic form and hold it in this account. Moreover, if you need to reconvert your securities to the physical form, this type of account offers this facility too. The DP will convert your electronic holdings to the physical form.
- Corporate actions
When you invest in equities, you enjoy several benefits along with capital appreciation. Corporate actions such as dividends, refunds, and interests offered by public companies are directly credited to your account. Additionally, share splits, issue of right shares, and bonus issues are also automatically updated to your account.
- Availability of loans
Most financial institutions offer loans against the securities held in your demat account. These are pledged with the lenders to borrow money to meet any fund requirements.
- Quicker processing
Account holders enjoy several facilities offered by the depositories. You do not need to submit physical slips to the DP and may complete the entire procedure quicker through electronically submitted instructions.
- Multiple accesses
You may easily access your account through multiple options. You may invest, trade, monitor, and conduct other operations through your computer, smartphone, and other devices.
- Freezing demat accounts
If required, you may freeze your account for a certain period of time. However, you may need some specific number of holdings in your account to freeze operations.
Dematerialization accounts are compulsory if you want to trade in the securities market. Opening an account is simple and quick. If you don’t have one, open an account today.