A demat, or ‘dematerialized’ account can best be described as an electronic briefcase for your financial instruments. It is used to hold shares and other securities in electronic formats. Instead of physical possessions of stock certificates, an investor can just convert physical shares into electronic formats for easy trade. According to the regulatory authority, SEBI, it is mandatory to have a Demat Account for any kind of trade. It holds not just stock certificates but all your financial instruments like shares, bonds, government securities etc. A demat account is a hassle-free way to trade that practically nullifies the storage risks of paper certificates and reduces the time consumed in offline trading to mere seconds. There are several banks and investment firms offering demat services to customers. The process to open a demat account is the same for all outlets.
How to open a demat account?
Opening a demat account in India involves four easy steps: -
Step 1: Select a Depository Participant (DP) you would like to open your account with. A DP can be your bank, a stockbroker or online investment platforms. Your DP is essentially your intermediary between you and your depository. You can check for DPs through the list available on the websites of depositories like CDSL (Central Depository Services (India) Ltd and NSDL (National Securities Depository Ltd).
Step 2: You will be provided with an account opening form. Along with that you need to attach photocopies of your KYC documents, passport size photographs and other required documents. The KYC form also has the Depository Participant-Investor agreement which includes the terms of agreement, rules and regulations, and charges you will incur whilst holding a Demat account. This form also includes the rights of the investor and duties of the DP.
Step 3: You may be required to appear for an In-Person verification to ensure the authenticity of your details. This may be carried out by an agent of your DP’s firm.
Step 4: After your application has been processed, you will receive a Beneficiary Owner Identity (BOID). This demat account number is your unique identity number which you need to access your account, facilitate trade, and make transactions. Once you have this number, you are ready to go.