Overview
In the world of trading and investing, the word “demat account” is commonly used. With nearly 4 million Demat accounts opened in 2018, a 13 percent rise over the previous year, the popularity of these accounts has reached new heights. The jump is largely due to Indians’ drastic change in savings patterns from conventional instruments to available alternatives such as stocks. As the demand for these accounts has grown, Depository Participants (DP) have responded by providing the best features at the lowest possible cost, benefiting investors. Furthermore, for stock market trading, SEBI has mandated the use of a Demat account.
Understanding the Basics of a Demat Account for Beginners in India
Consider three main definitions in this sense to gain a better understanding of how to operate demat accounts in India.
Unique 16-Digit Client ID
A unique 16-digit client ID is assigned to each Demat account, which serves as the investor’s identity. The first eight digits of the ID reflect the depository participant, while the last eight digits serve as a unique identifier for the investor, making it easier to sell or buy shares and securities.
Depository Participants (DP)
A depository participant serves as an intermediary or representative for a central depository, providing the same services to investors and traders as the central depository. NSDL and CDSL are the two central depositories currently registered with SEBI, India’s apex trading and investment regulatory body. To open a Demat account, a depository participant must be registered with one of these two licenced operators.
Dematerialisation
It is a procedure that allows share certificates to be converted from physical to electronic form. Shares purchased after that are easier to handle and can be accessed from anywhere on the planet. You can also control and track your holdings on the go thanks to dematerialisation.
Is There A Step-by-Step Guide On How To Operate Demat Accounts Online?
The process of operating a Demat account is very easy. If you’re thinking of starting one, this step-by-step guide will help you get started.
Selecting a DP
The first step in opening a Demat account is to choose a depository participant (DP). DP services are available in India through banks, stockbrokers, and online investment platforms. When selecting a DP, look for a service provider whose offerings and features fit your needs and specifications.
Fill out the demat account opening form and send it in
To open a Demat account, go to your DP’s website and fill out the online Demat account opening form. Many depository members, such as IIFL, allow you to open both trading and depository accounts.
Examine KYC guidelines
After you’ve completed the Demat account application, you’ll be asked to complete the Know Your Customer (KYC) requirements. This will necessitate the submission of scanned copies of KYC documents such as proof of identity, proof of address, bank account statement, and proof of income. It’s a good idea to have all of the necessary paperwork on hand before applying, as this will help you move through the process more quickly.
Carry out the verification procedure
Your DP will ask you to go through an ‘In Person Verification’ (IPV) process. This is a necessary exercise that you must complete in order to check the validity of your records. You may be required to appear in person at either of your service provider’s offices, depending on your DP. Many depository users, on the other hand, now provide IPV services online using a webcam or a smartphone.
Copies of the Agreement to Sign
After you’ve completed IPV, you’ll be asked to sign a contract with your DP. This agreement enumerates all of the depository participant’s and investor’s responsibilities and rights.
Obtain your BO Identification Number
If this is completed, your DP will begin processing your Demat account application. You will be given a special Beneficial Owner Identification Number once your application has been approved (BO ID). Your Demat account is accessed using this BO ID.
Opening Demat Account For Beginners Requires Submission of the Following Documents
The paperwork required to open a Demat account is minimal. This makes it easier for new applicants to follow the procedure from beginning to end without experiencing any difficulties. Only the documents mentioned below must be submitted.
- A copy of your PAN card with your picture as identification
- Proof of address: A copy of any of the following documents would suffice as proof of residency – Voter ID, Passport, driving license, etc.
- A copy of your checking account passbook or bank statement as evidence of your bank account (not older than 3 months)
- Proof of your earnings: a copy of your most recent pay stubs or your tax return (mandatory for the currency and derivatives segment)
What is the Aim of Having a Demat Account?
If you want to invest in the stock market right now, you won’t be able to do so without a Demat account. That is why learning how to operate a Demat account is crucial in the world of stock trading. Some of the other factors that contribute to the importance of a Demat account are briefly discussed below.
Safety
You won’t have to deal with forged or bogus share certificates if you have a Demat account. Each and every record of shares in your account is authentic.
Reliability
Physical share certificates can be difficult to store and maintain. There’s also the possibility of your certificates being misplaced or impaired. All of these issues are resolved with a Demat account.
Affordability
You can view any of the documents associated with a Demat account from anywhere and at any time since they are all online and electronic.
Reduced fees
Additional costs associated with physical share certificates, such as processing fees and stamp duties, are eliminated with a Demat account. As a result, there will be reduced costs and considerable savings.
Demat Account Closure
It is just as easy to close a demat account as it is to open one. To close a demat account, you must fill out a request form that is signed by all account holders (in the case of multiple holders). Before closing the demat account, you must pass all of the account’s holdings. If any Dematerialisation requests are pending, the DP will not process the closure submission.
Wrapping Up – Demat Account For Beginners
It may seem that operating a Demat account online is a difficult task, but it is actually very simple if basic steps are followed. For beginners, a demat account is needed for entry into the world of trading. It is now easier than ever to operate a Demat account. The Demat Account concept has given the stock trading industry a new face, as investors have been able to avoid the hassles of keeping physical records. The best thing about using these accounts is that they can be accessed directly from mobile devices and computers. With the aid of Demat and trading accounts, you will enjoy a completely different trading experience.
