What is a 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. Such accounts keep the shares safe and prevent loss of shares or any kinds of risks and challenges related to forgery. It’s mandatory to have a Demat account for stock investment. Besides, through a Demat account, investors can apply in IPOs. Demat account makes the entire process of share trading quick and easy as it’s online.

Importance of Demat Account

  • A Demat account prevents the loss of documents and speeds up the entire process of buying and selling stocks.
  • Demat account simplifies the entire investment journey for an investor and helps them track all their diversified investments at one place in one view.
  • It helps investors to participate in upcoming IPO in an easy and simplified way.

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 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.

Features and Benefits of a Demat Account

  • Digital account

    One of the biggest benefits for investors is that it is digital. This means that it can be opened online and accessed easily.
  • Safe holding

    A Demat account holds the shares safely unlike physical shares that bear the risk of getting lost, damaged, or stolen.There isn’t any chance of forgery or theft.
  • Convenient storage and transfer

    A Demat account offers the convenience of storage and transfer. As a result of this, you can store any number of shares. You can trade in volumes and monitor the details of all the shares held here. Furthermore, it facilitates the swift transfer of shares while trading online.
  • Facilitates easy transfer

    Physical share certificates require paperwork and time delay in transfer of ownership. A Demat account eradicates all paperwork and makes it easy to transfer shares online.
  • Various access points

    Since a Demat account is electronically operated, a user can access his/her account from various touch points like mobile, tablet, laptop, PC etc.
  • Temporary freeze

    You can freeze your Demat account temporarily to avoid any transaction for a certain period.
  • Stores multiple investments

    A Demat account can store different kinds of investments. It can hold multiple assets like Bonds, Exchange Traded Funds (ETFs), Mutual Funds, government securities, etc.
  • Nomination facility

    A Demat account gives the nomination facility as per the process laid out by the depository. In the event of the investor’s demise, the appointed nominee is entitled to receive the shareholding in the Demat account.
  • Loan Collateral

    The securities held in your Demat account can be used for pledging. You may use them as collateral to take a loan from a financial institution.
  • Transfer of shares

    You need to send a DIS (Delivery Instruction Slip) signed to your Depository Participant for share transfer.

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.

  1. Regular Demat Account

    This is only for Indian citizens, who reside in India.
  2. 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 Non-Resident External bank account, which is a must for Non-Resident Indians.
  3. 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 in paragraph

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.

Why Open a Demat Account with BFSL

  • It is Free

    You can open a free Demat and Trading Account through the Freedom subscription pack. There are no charges in the 1st year. Rs. 365 +GST is levied as account renewal charges from 2nd year onwards.
  • Seamless service

    We are known to offer fast and seamless service. You can access a self-service portal – ‘Samadhan’ to update your email id, bank account, subscription plan upgrade, segment addition etc. online.
  • Full trading experience

    With BFSL Demat & Trading account, you can trade in equity cash & derivative segment, use scanners to filter stocks at key levels on technical charts, access the list of shares recommended by our stock research partner-Pickright * & also invest in bonds offered by GoldenPi*.

    Disclaimer

    * BFSL is only distributor of this product (Pickright & Bonds); These are not exchange traded products and all disputes with respect to the distribution activity, would not have access to the exchange investor redressal forum or Arbitration mechanism. BFSL is not a registered Investment Advisory or Research entity. User discretion is required before investing.

  • Apply in IPO

    With BFSL Demat Account, you can apply in IPO directly in the trading application and profit from listing gains.
  • Filter stocks at key levels on technical indicator

    Use Scanners in BFSL demat & trading account to filter shares at key level on technical indicator charts and invest for short & long term conveniently.
  • Access from anywhere

    You can securely access BFSL demat and trading account through web link on your desktop or laptop and through Bajaj Securities App app mobile.

Documents Required for Demat Account Opening

  • PAN Card: It’s a mandatory document to open a Demat account. Ensure the picture and signature are clearly visible
  • Photo: A passport size photograph
  • PAN Card: It’s a mandatory document to open a Demat account. Ensure the picture and signature are clearly visible
  • eSignature: A running signature on a white background paper
  • Address Proof: Any one of these documents - Voter ID, Driving License, Aadhar Card, Passport, Utility Bill (not more than 3 months old) or last 3 months bank statement
  • Bank Proof: Anyone these documents - Cancelled cheque, passbook, bank statement of 6 months. Ensure clear visibility of IFSC code and bank a/c number
  • Income Proof: This is required only when you want to trade in Futures & Options. You can provide any one of these documents – Bank statements for 6 months,
  • Net-worth certificate, 3-months’ Salary slips, ITR statement, Demat holding statement or Holding report with Demat Account Opening Fees and Charges. With Bajaj Financial Secures Limited, open free Demat Account and get one of the lowest brokerage rates with multiple unique offerings.

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.

Reg Office: Bajaj Auto Limited Complex, Mumbai –Pune Road Akurdi Pune 411035. Corp. Office: Bajaj Financial Securities Ltd., 1st Floor, Mantri IT Park, Tower B, Unit No 9, Viman Nagar, Pune, Maharashtra 411014. SEBI Registration No.: INZ000218931 | BSE Cash/F&O (Member ID: 6706) | NSE Cash/F&O (Member ID: 90177) | DP registration No : IN-DP-418-2019 | CDSL DP No.: 12088600 | NSDL DP No. IN304300 | AMFI Registration No.: ARN – 163403. Website:https://www.bajajfinservsecurities.in/

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Demat Account FAQs

Demat Account is needed to hold the shares in digital mode. The shares are traded in stock exchange in digital mode only. So, any one who wants to participate in online share trading should have a Demat & Trading Account.

There are mainly three types of Demat account –
1) Regular Demat Account - The Regular Demat Account is basically for investors who are Indian residents. This type of demat account doesn’t allow you to trade in F&O as its only for those who deals with requity shares.
2)Repatriable Demat Account – This Demat account allows securities to be repatriated outside the country. It is linked to an NRE (Non-resident external) bank account which allows funds (resulting from selling securities) also to be transferred outside India.
3) Non-Repatriable Demat Account – Here the securities are not allowed to be moved outside the country. This Demat account is linked to a Non-resident Ordinary (NRO) account which also does not allow funds to be moved outside the country. The transfer from NRE account for funds to NRO account is easy but the reverse is not true.

BFSL has designed exclusive subscription packs for traders and investors with one of the lowest brokerage rates. Click here to know full details about the packs.

Yes, a Demat account can be opened jointly. It can have maximum of three holders – one main holder and two joint holders.

Yes. Demat account is mandatory to apply for an IPO in India as the shares are stored in digital or electronic form only if allotted as per SEBI regulations.

As the whole process to open a Demat account is digital now, it takes 8-12 hours to open the account once the application is submitted successfully and verified.

Yes, Demat Account holds the shares and other financial securities in digital mode. A demat account holder can access it from anywhere through mobile or laptop. Any transaction in demat account is reported to accountholder by the broker through SMS or email. Even the stock exchange and depository inform the account holder about any activity in the demat account. A demat account holder must keep the login id and password safe and confidential. They can report any suspicious transaction immediately to the broker. It is comparatively safer to the old process of storing paper-based shares.

-Use the login id & password to login to the demat account

-Most brokers provide Demat & Trading account, so the interface will show details of shares currently being traded

-Also, trading account is linked with bank account, transfer fund from the bank to the ledger of trading account

-Select the share to buy, the corresponding amount will be used from the ledger

-Once the order is executed, the share will get credited in Demat Account on T+2 days, where T is the day of transaction

Your application will be reviewed by the verification team at broker’s end. They will match the details you entered with the proof document that you submitted. In case there is no difference, your application will be approved, and you will receive the login id & password to login to your Demat & Trading account. In case there is any aberration, the broker will contact you to correct the details and resubmit the application.

Just like any bank account holder has a bank account number to establish his/her unique identity, a demat account holder has a demat identification number. It is a 16-digit number.

A person above 18 years of age with valid proof of address, proof of identity, PAN Card and a bank account can open demat account in India.

Yes, several brokers offer Demat account for free. With Bajaj Financial Securities Limited, you can open Demat & Trading account for free through Freedom subscription pack. There are several charges associated with Demat & Trading account as listed below:

- Account Opening charge

- Annual Maintenance charge

- Pledge charge

- DP transaction charge

- Dematerialization & Rematerialization charge

Most brokers today provide Demat & Trading Account, and you need not open them separately and link them. Technically, it is crucial to link Demat & Trading account since Demat Account only stores shares in digital form, whereas Trading account is needed to buy & sell shares in the share market.

Yes, you can link a new trading account with a Demat account. You have to connect with your stockbroker where you have trading account and complete the necessary formalities.

3-in-1 account is a special type of account where 3 accounts are given to you together- Demat Account, Trading Account & a bank account. This is preferred by investors who want to keep a separate bank account linked only for trading purpose. Such accounts are generally offered by banks which also have a stock broking arm.

Most important features of demat account are:

  • Demat Account helps in storing shares in digital mode
  • Demat Accounts are offered by Depository. NSDL & CDSL are two depositories in India
  • A Demat Account holder gets 16-digit identification number
  • To trade in share market in India, Demat & Trading Account is mandatory
  • Shares are held in Demat Account in digital mode. Just like cash is held in bank account in digital mode, a demat account holds shares in digital mode. Each share has a unique identification number (ISIN) and is mapped to the demat account holder in whose demat account the shares are held.