If you’re new to the world of stock trading, the first thing that you would have to do is open a demat account. Long gone are the days where stock trading used to happen in an ‘open outcry’ system. Ever since the introduction of the electronic mode of stock trading, almost all trades happen via the internet and an electronic trading portal.
Since trading is completely electronic these days, possessing a demat account has become a mandatory prerequisite for trading. With respect to demat accounts in India, you have two options that are made available to you – an NSDL demat account and a CDSL demat account. NSDL and CDSL are both depositories in India.
If you’re wondering what an NSDL demat account is, here’s everything that you need to know. Let’s get started by looking at what a demat account is and what NSDL stands for.
What is a demat account?
A demat account is essentially an electronic account that’s used to store securities such as equity shares and bonds in an electronic format. Think of the demat account as a bank account for shares and other securities.
Since physical share certificates are no longer in use, all the equity shares of a company are supposed to be held in an electronic format. And for this purpose, a demat account is used. Such an account offers plenty of benefits and advantages like increased safety and security, quick and easy transfer of shares, and direct credit of corporate actions such as dividends and bonus issues of shares.
What is NSDL?
Similar to how you open a savings account with a bank or a financial institution, a demat account has to be opened with a depository through a depository participant (DP). In India, there are only two depositories, one of which is the NSDL. NSDL stands for National Securities Depository Limited and is the country’s first-ever and premier institution offering depository and demat account services. Apart from offering demat accounts, NSDL is also involved in providing multiple other share-related services for its customers.
What is an NSDL demat account?
A demat account that’s opened with the National Securities Depository Limited (NSDL) is commonly referred to as an NSDL demat account. Since you cannot approach a depository directly to open a demat account, you would have to approach a depository participant (DP) that’s registered with NSDL to open an NSDL demat account.
All that you have to do to view the list of all the depository participants registered with the NSDL is visit the depository’s website. Usually, most stock broking houses also double up as depository participants as well. And so, you can also get in touch with your preferred stock broker to get more information about whether or not they are registered with the NSDL.
How to open an NSDL demat account?
The process of opening an NSDL demat account is extremely easy and simple. Here’s a brief overview.
1. Firstly, you would need to get in touch with a depository participant that’s registered with NSDL.
2. You’ll then be required to complete the Know Your Customer (KYC) requirements. This includes submitting the requisite application form duly filled along with a copy of your PAN card, your address proof, and your bank account details to the DP.
3. Once all the relevant documents are received by the DP, they will be subject to verification.
4. Upon successful verification of the same, the DP shall open a demat account with NSDL on your behalf.
5. After opening the account, the DP will give you the details related to your account, such as your DP ID, Client ID, a copy of your Client Master Report, tariff sheet, and a copy of the Rights & Obligations of Beneficial Owner and Depository Participant.
6. In addition to this, your DP would also provide you with the NSDL demat account logincredentials, which you can then use to log into your NSDL demat account.
Conclusion
Once you’ve opened an NSDL demat account through your DP, you can buy and sell securities on the stock market electronically via your trading platform. If you’re already in possession of physical share certificates of a company, you can also place a request for dematerialization of the same with your DP. Your DP would then convert the physical shares into the electronic form and credit them into your demat account.
Also, with an NSDL demat account, you get to enjoy several other features such as access to a dedicated NSDL Mobile Application, electronic voting facility, and electronic Delivery Instruction Slip (DIS) facility, among others.
All said and done, here’s a point to note. Your NSDL demat account login credentials are highly confidential and should be treated with utmost care. And so, keep your user ID and password safe and never share them with anyone. This way, you can protect your NSDL demat account from unauthorized access.
