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How To Open A Demat Account? Research Team | Posted On Friday, November 09,2018, 10:03 AM

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How To Open A Demat Account?



You must be familiar with stocks, but do you know what’s a demat account? To buy and sell stocks you need a demat account, trading account and a bank account. A demat account is just like a bank account. While money is stored in the bank account, shares are stored in the demat account. Shares in the demat account are in dematerialized form. It is the process of converting physical shares to electronic form. You don’t need shares to open a demat account. A demat account can be opened with no shares.

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How To Open A Demat Account?

Demat Account Charges:

Let’s take a look at the charges in a demat account. Demat accounts have nominal or nil charges. It’s wise to open a 3-in-1 account which is a savings bank account, demat account and a trading account. While shares are stored in the demat account, you require a trading account to buy and sell shares.  

Depository participants, DPs, and banks keep your shares safe. DPs are the agents of depositories like NSDL and CDSL. Your demat account must be opened with a DP and a depository is like a bank which holds the shares. DPs and banks charge a custodian fee to keep your shares safe.

Basic Services Demat Accounts (BSDA) with a balance (holding value) up to Rs 50,000, do not have annual maintenance charges (AMCs). For holdings worth Rs 50,001 to Rs 2 Lakhs, you have to pay around Rs 100 to Rs 750, based on the number of transactions you make. If the value of transactions is over Rs 2 Lakhs, annual charges would be above Rs 2,000. Depository participants have transaction charges which would be around Rs 1.5 for every share you trade.

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How to open a demat account?

  • You have to select the depository participant/bank where you want to open the demat account. You could open a demat account with Sbicap Securities, ICICI Direct, Kotak Securities, HDFC Securities among others. Most brokerages offer the service.
  • Fill the demat account opening form and submit copies of requisite documents and a passport-sized photograph. Submit copies of the PAN and take original documents for verification.
  • Take a look at the rules and regulations and the terms of agreement/charges you will incur.
  • There’s In-Person Verification where a member of the DPs staff will contact you to check details in the account opening form.
  • After processing the application, the DP will give you a client ID with an account number. With these details, you can access your demat account online.
  • You would have to pay fees for opening and transacting through the demat account. The fees are mentioned in the demat account fees article.
  • You can open a demat account without any shares.

Types of brokers:

If you want to invest in stocks online, get an online broking account. There are a number of brokerages like angel broking, edelweiss financial services, Zerodha and sharekhan. You can also look at HDFC Securities, ICICI Direct, Axis Direct among others.

You can choose between a discount broker and service broker. The discount broker carries out trading instructions vis-à-vis equities and derivatives. It carries buy/sell at reduced commissions. A service broker in addition to all this offers seamless investing options on its platform for IPOs, mutual funds and even insurance products. A service broker gives research reports on stocks and sectors to make investments. Most of the broking firms around are service brokers.

SEE ALSO: Child Aadhaar Enrolment

Features of a demat account:

  • Demat account holders enjoy faster dematerialization and rematerialization of shares. Dematerialization is the conversion of physical shares to dematerialized or the electronic format. Rematerialization is converting shares held in the electronic form to the physical form.
  • Pledge and avail loans: Shares in the demat account can be pledged to avail loans. (Shares are pledged as collateral).
  • Demat holders can freeze the account: Demat accounts can be frozen to prevent unwanted debit/credit into the demat account.
  • Demat accounts have multiple assessing options: Demat account can be accessed through mobile, desktop or other devices. Internet is a must.
  • The speed e-facility: NSDL allows you to send instruction slips electronically, instead of making a physical submission at the DP.

Why open a demat account?

  • It’s an easy and convenient way to hold shares.
  • It’s safer than physical certificates which can be stolen, torn or destroyed in a fire.
  • You can hold odd lots.
  • Reduced cost and time of transactions. (Buy/Sell)

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