What is Demat Account?
A Demat Account, also known as a dematerialized account, is one of the prerequisites to trade shares in the share market. A Demat account is used by an investor to hold shares and securities in an electronic form. Demat accounts are maintained by two depository organizations namely the National Securities Depository Limited (NSDL) and the Central Depository Services Limited (CDSL) respectively. You can hold several securities, like, ETFs, stocks, bonds, and mutual funds in your Demat account App.
What is dematerialization (Demat)?
Demat, which is the abbreviation for Dematerialization is the process of converting shares from the physical form to electronic form. Dematerialization is a safer and more effective way of maintaining records. At the time of online trading, shares are bought and held in a Demat account thereby facilitating easy online trading for users.
Types of Demat account
At the time of account opening, an investor needs to select an account type that suits their profile. The most common is the Regular Demat account. Any Indian can open a regular Demat account within a few minutes through an online account opening process. The other two are for non-resident Indians. Let’s take a look at the types of Demat accounts.
Regular Demat Account
This is only for Indian citizens, who reside in India.
Repatriable Demat Account
This type of Demat account is for Non-Resident Indians (NRI). Once a customer becomes NRI, they need to close their regular Demat account and open a Non-Resident Ordinary (NRO) Demat account along with a Non-Resident External bank account, which is a must for Non-Resident Indians.
Non-Repatriable Demat Account
This is a Demat account for NRIs, however, the funds cannot be transferred abroad through this account.
Depository and Depository Participants
There are mainly two different entities involved in Demat accounts, Depository and Depository Participants. Depositories manage the financial investment portfolio of investors and the Depository Participants (DPs) act like agents between depositors and investors. National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL) are two depositories that are operational in India, rest are all innumerable commercial banks and brokerage agencies are Depository Participants.
DPs handle individual customers and process their requests as well as oversee the transactions. They also suggest stock market investments to their clients.
How to Open a Demat Account
The digital process of opening a Demat & Trading account has made trading much easy for all the traders and investors. It is as simple as ordering food online or shopping from any e-commerce site. To open a Demat account , one needs to select a stockbroker who is SEBI registered and is a Depository Participant at NSDL & CDSL. To open a demat account, follow the simple steps below:
Step 1: Visit the Demat Account Opening Form
Click open an account and start filling your application form to open online demat account. Enter mobile number and email ID and get started.
Step 2: Enter your PAN Number, basic details, address, and Bank details Update the required basic details like PAN number which is a mandate and bank details to link with your demat & trading account.
Step 3: Upload the soft copies of KYC documents
Once you fill all the details, you are required to upload your scanned documents for KYC purposes such as income proof, bank details, photograph etc.
Step 4: Complete In Person Verification (IPV)
In-Person Verification is a process where you record yourself for 30seconds with the intention of verifying the authenticity of your documents. While recording, keep your PAN and other documents handy with your as you need to read all the details clear and loud.
Step 5: E-sign the form using Aadhaar linked mobile number
Do a signature on white background and upload as e-sign in the form where required along with your mobile number linked to your Aadhaar Card.
Step 6: Review & Submit the application
Check the complete application to ensure correct details and submit the application.
Conclusion
Demat Accounts have undoubtedly made the overall trading experience less cumbersome and time-consuming. It’s one of the most commonly used methods of investing in the stock market. Before you want to open a Demat Account with your chosen DP, it’s important that you do a thorough homework on them. BFSL is one of the best options when it comes to affordability and performance. Open a Demat and trading account and start your investment journey today.
Disclaimer: Investment in securities market is subject to market risk, read all related documents carefully before investing.