A Guide to Open Demat Account in India

Demat Account is the term that is commonly used in the world of trading and investments. When the world is turning digital and finding the share market as a second investment option, opening a demat account has been common. The popularity of these accounts has reached a new height which has around 4 million holders. The number is increasing every year, and the percentage has seen a quite good hike for the past few years. Get the complete guide to open Demat Account in India.

The drastic shift in the pattern of the saving from the traditional instruments to the other alternatives includes the stock, due to which the primary jump can be seen. 

The increasing demand for the accounts has led the depository participants to offer the clients the best features at minimum costs, which benefits the investors. Also, the SEBI has made it important to hold a demat account for the stock market trading.

Understanding the Basics of the Demat Account 

Here are some of the crucial terms in context for a better understanding of Demat accounts in India.

Dematerialization

Dematerialization is the process that helps in or facilitates the conversion of the shared certificates from the physical to the electronic form. After this, the holding shares are easier to manage and access from anywhere around the globe. 

Also, it allows the client to monitor and track the holidays seamlessly and on the go.

Depository participants

A depository participant acts as the mediator for the or agent of a central depository and provides all the related services to investors and traders. India right now has two central deposits registered with the apex trading and investment regulatory body SEBI.

● NSDL

● CDSL

A depository participant is the one who needs to be registered and licensed with any of the two participants to be able to open the Demat Account. 

Unique 16-digit client ID

Every Demat Account comes with a unique 16-digit client ID, which acts as the investor’s identity. The first part of the eight digits is the ID representing the Depository participant. In comparison, the other eight digits easily represent a unique identification for the investor, facilitating the sale or purchase of shares and securities.

Step-by-Step Guide to Open Demat Account in India

Here is the complete guide to open Demat Account in India which is a straightforward process with nothing involved. If you want to open the Demat Account, here is a step-by-step representation of how this works.

Step 1: Apply For A Demat Account Online

Here are the steps by which you can open your free Demat Account through any of the websites of the leading brokers in India.

Step 1: Enter your mobile number and provide the Email for the same. 

Step 2: then, you will carry forwarding to another page on which you have to provide the KYC details.  

To register with the DP and open a free Demat account, you need to register and open a free Demat account online. For this, you also need to complete all the formalities asked for the mandatory KYC. Also, these can be submitted via the website or on the mobile application.

Step 3: After this, the verification for the document is needed. 

Once you have gone through the process and submitted the complete document, the DP client will verify your KYC details to ensure utmost transparency.

Step 4: Acquire Beneficial Owner Identity (BOID)

Talking about the application processing, you will receive a unique 16-digit demat account number (BOID) from the DP after all this. After receiving this, you will successfully open a Demat account, and now you can trade. 

List of the documents to open Demat Account in India

Here are the important documents that you need to keep while opening a Demat account. This will make it easier and will help in starting hassle-free Account opening processes. The List comprises the following documents.

1. Proof of Identity (POI) (Eg.: Driving license)
2. Proof of Address (POA) (Eg.: Passport)
3. Proof of Income (For trading in derivatives such as F&O) (Eg.: Copy of ITR Acknowledgement)
4. Proof of Bank Account (Eg.: Cancelled cheque)
5. PAN Card
6. 1 to 3 passport size photographs
7. Bank passbook or account statement ( this should not be older than three months),

Reason to open Demat account in India?

Walking about the current scenario and market situations, if you are interested in investing your money in the share market, the only way to do it is by opening a demat account. This is how important a demat account is for share trading. So some other major reasons for opening a demat account are listed below and explained.  

Safety:

Demat Account, you don’t have to worry about forged or fake certificates. The records that are mentioned in the demat Account are genuine. 

Convenience:

The Accoun helps in the proper storage and maintenance of all the physical share certificates, which can genuinely be tiresome and hassle. Also, it comes with a risk of the loss and damage of the certificates, so a demat Account helps solve all such problems.

Accessibility:

It is easy to access all the documents as they are available in the electronic form and also it makes it easier to access from any part of the world which makes it another best option. 

Lower charges:

To open a demat account, you need to give out additional costs for handling charges and stamp duty, which used to be levied on physical share certificates. The charges are the lowest depending on the company to company.

Multiple securities:

This is not just an account for the one merely supporting the equity shares but can also be used for many different electronic financial instruments, including bonds, mutual funds, and debt securities. This helps you in monitoring your investments and that too under a single roof.

Point to be noted while opening a demat account 

It is important to know some points before going ahead and opening a demat account via a Depository Participant DP. you need to keep some of the points in mind, some essential pointers. Here is the list of the points you need to remember.

Demat account and trading account

Talking about the demat Account linking with trading accounts. Demat Account holds the securities and trading account is by which you are going to do all the buying and selling of the stock in the share market. Therefore it is important to like both of the accounts as it works simultaneously with each other. So it is better to ensure to connect your demat Account with a trading one. Also, the most important thing nowadays is that you get both accounts under one roof. 

Be well versed with all the Demat Account Charges. 

It is important to look for all the charges before investing in the demat Account with any company. It would be best if you read through all the charges from the statement fess to other additional charges so that you can make the wise decision of joining the right demat Account.

These charges ensure no further additional charges and any cheating with yourself via the company. 

Fill in your details correctly:

All remember to give out the correct details while the time of opening a demat account. Any the errors with any incorrect answers or details can lead to the rejection of the application. Always double-check the information before submitting it finally. 

File your nomination:

Another important thing to notice is that people miss filling out the nominee for the demat Account and make it further. Later they forget to do so, so it is important to fill out all the necessary details regarding the nominee to make the future transaction smooth. 

Tips to look for the Best Demat Account in India

This is important to look for before opening a demat account and best demat Account in India. Different options will influence your voice in choosing the correct demat Account. The points below are the ones you need to look for before choosing a demat account. 

Type of depository participant:

The first and foremost thing is to choose the type of depository participant you want to go for. There are two types of depository participants: one is the discount broker, and another one is the full-service stockbroker. 

So a discount generally does not provide any kind of services apart from share trading and trading derivatives. On the other hand, the full-time service broker provides all the related facilities for the same. They charge higher than what a discount broker charges. So, in short, look for the one you need the most. 

Fees and Demat account charges:

Look for all the charges and the fees that your depository participant charges, and it may vary from one to another. It is a better idea to compare all the prices and choose the right one accordingly. So always have a good comparison before choosing a demat account. This will surely help you prevent you from losing any money in the hidden charges in the future. 

Customer support:

Another most important thing to look for is the customer support that the company provides. Your depository participant should have proper and effective customer care services to help resolve the clients’ problems on time. Always look for how fast the services and responses are and how good they are at resolving them. 

Trading technology:

Another important thing to be noted is the trading technology used by the depository participants. You need to evaluate and see if the tools are of any use to you or not. Also, the Ui of the platform is smooth and fast enough or not. The UI should be clean, clutter-free, easy to understand, and user-friendly.

Features:

Not every depository participant provides the same features to their clients, and everyone has their feature and their work. Look for all the features before you choose the DP for further transactions. 

Here is the list of some must-have features your depository participant must hold. 

● Real-time stock feeds

● Bid and ask spreads

● The ability to customize watchlists

● A quick analysis of stocks and companies

● Details of your portfolio

Important terms to be noted 

What is the ISIN number?

ISIN Number is also known as the International Securities Identification Number. It is a kind of a unique code used to identify specific securities, for example. (E.g. INE214T21519).

How to look for an ISIN number?

One can easily find the details related to the ISIN Number of securities on the websites of the NSDL and CDSL, which are the two leading depository participants. 

What is Power of attorney (PoA)?

● So Power of attorney authorizes some third person to operate the client’s DP account on their behalf. You can easily authorize the individual to exercise PoA rights after submitting it to the DP.

● PoA is not a mandatory facility; you can use it as an option if you want to or not. Also, it is in your hand if you want to revoke it or not. No broker or the DP has the right to deny services if you refuse to execute them.

Closure of Demat Account

It is important to know about the closing of the demat account. It is as simple as opening a demat account. You need to submit the request form, which is to be signed by you and submitted to the authority, and it should be signed via all the holders (in the case of multiple holders).

You need to make sure to transfer all the holding of the demat Account before giving it a closure. The DP will not process the closure if any of the dematerializations of the document is not done. 

Conclusion

It is easy to open demat account with a very fast and hassle-free process.