Meaning and
definition of Demat account
Dematerialized
accounts or Demat Accounts were
introduced to make stock market trading easier and monitor holdings
efficiently. However, as time went by, it became more advanced with more
features to ease trading and holding investments.
A Demat
Account holds securities in the form of shares, bonds, mutual funds, government
securities, or exchange-traded funds. Demat account avoids the hassle
of all the paperwork you need to make trading transactions.
Demat accounts
have become immensely popular in the last few years. The dramatic shift in the
savings pattern of Indians from traditional fixed deposits to new alternatives
such as stocks and shares is primarily responsible for the hike in the numbers
of Demat account holders.
Benefits of opening
Demat Account
Easy access to
Investments:
A Demat
Account can give quick & easy access to your investments and statements
through net banking. Also, these details can be available to you anywhere like
computer, smartphone or any other smart device.
Corporate
benefits & actions :
If the
companies offer dividends, refunds, or interest to their investors, these
benefits are automatically available to the Demat account holders. In addition,
corporate actions like bonus issues, right shares, or stock split are
automatically issued via Demat account of all the shareholders.
Avail Loans
against securities :
There are many
financial institutions that offer loans against securities that the borrower
has in his demat account. You can use your securities as collateral while
availing of loans by these financial institutions.
Liquidity of shares:
Demat Accounts
have made it simpler, faster and convenient to get money on selling shares.
This will help in planning our future activity easily.
Easy Share
transfers:
Transfer of
shares on buying or selling have also become much easier. Earlier physical
transfer of shares would take about 1 month time. With this process simplified,
costs have also come down. There is no stamp duty on transfer of securities
held in the electronic form.
Steps to Open Demat Account:
1.
Select Depository participants (DPs) : are banks or brokers who act as intermediaries between you and
the depository. Just as banks hold your cash, depositories hold your shares and
securities. So, visit a depository participant’s website to sign up for a demat
account. The depository participant will ask you to enter your Aadhaar, PAN and
contact credentials.
2.
Validate PAN and Aadhaar cards : You will receive a one-time password (OTP) on the mobile number
that is linked to the Aadhaar card. The OTP is sent to validate your PAN and
Aadhaar cards. Once you do that, the DP will ask for your bank details, address
and the brokerage plan you need.
The webpage will then prompt you to upload document proofs. This
may include a passport-sized photo, an ID proof, address proof.
3.
Final Verification process: After
submitting your Demat account opening form along with the requisite proofs, you
will be asked by your DP to go through a process called ‘In Person Verification’ (IPV).
This exercise is mandatory, and it’s carried out with the intention of
verifying the authenticity of your documents. Depending on your DP, you may be
asked to be present in person at any one of your service provider’s offices.
However, many depository participants now offer IPV services online through the
use of a webcam or a smartphone.
Some Points to remember:
You will get
to know about the statement of fees and charges for maintaining the account from
the DP’s website. This helps the investor to compare different DPs in terms of
their charges.
Linking the
Demat account with the trading account is important as a trading account is a
necessary tool for trading in stock markets.
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