What is Demat Account ?

Topics Covered

• What is Demat Account?
• Importance of Demat Account?
• What is dematerialization (Demat)?
• Features and Benefits of a Demat Account?
• There are several benefits of Demat Account
• Types of Demat Account
• How does Demat Account Work?
• How to Open a Demat Account?
• Why open Demat account with Religare Broking?
• Documents required for demat account opening
• Demat account Fees & Charges

What is Demat Account?

A Demat Account or a Dematerialized Account is an online trading & investment account that holds your securities in an electronic format. It is similar to a bank account where your money is parked and you can transact electronically. Just like a bank account, you get a monthly account statement as well as details of each market transaction done under the demat account.

You can hold shares, bonds, mutual funds, government securities, and other securities in a demat account online. The account is linked to a trading account, which is again linked to a bank account for real time transactions.
The online trading & investment process via a Demat account eliminates the need for physical share certificates, and thus makes buying, selling, and transferring securities more efficient and hassle free for investors.
In India, opening a Demat account is mandatory for trading in stocks and other securities on the stock exchanges. The Securities and Exchange Board of India (SEBI) is the regulatory body. You can open a Demat account with a Depository Participant (DP), which is a registered intermediary authorized by the Depository (NSDL or CDSL) to offer Demat services. The DP acts as a link between the investor and the depository, and it helps investors to buy, sell, and hold securities in electronic form.

You make online trading transactions on DP’s website or app. Further, your Demat & Trading accounts are linked to your Permanent Account Number (PAN) and all records are thus unique to your individual identity.

Recommended Read: Advantages of investing in a Mutual Fund

Importance of Demat Account?

The Demat account is an essential tool for investors in India. It is not only mandatory to have a demat account to participate in the securities markets, but also a one stop account where you can transact & record your portfolio updates in real time at one single destination electronically.

Here are some of the reasons why demat accounts are important and why you should choose the best demat account in India.

Safe and Secure:

Demat accounts eliminate the risk of loss, theft, or damage associated with physical share certificates.

Easy and Convenient:

It makes buying, selling, and holding securities easy and convenient. Investors can transfer securities electronically without the need for physical transfer of certificates.

Faster Transactions:

Investors can buy or sell securities within minutes.

Lower Transaction Costs:

Demat accounts have reduced transaction costs associated with handling of physical certificates, such as stamp duty, handling charges, and courier charges.

Automatic Updates:

Investors receive automatic updates on corporate actions such as dividend declarations, bonus shares, and rights issues.

Access wide range of securities at one place:

With a Demat account, investors can invest in a wide range of securities such as shares, bonds, mutual funds, government securities, and more.

IPOs:

A Demat account is mandatory to participate in Initial Public Offerings (IPOs).

What is dematerialization (Demat)?

Dematerialization is the process of converting physical share certificates into electronic form so that these securities can be held digitally in a Demat account.

Before the introduction of Demat system in 1996, shares were traded in physical form, and investors had to hold share certificates as proof of their ownership. This process was time-consuming, inefficient, and had several risks such as theft, loss, or damage.

With the Demat system, investors can hold securities in electronic form, and transactions can be completed quickly and efficiently in real time. Dematerialization of securities involves the submission of physical share certificates to a Depository Participant (DP), along with a Demat request form. The DP then verifies the certificates and initiates the process of dematerialization with the relevant depository.

Once the dematerialization process is completed, the securities are credited to the investor's Demat account, and the physical share certificates are destroyed. Investors can then buy, sell, and hold securities in electronic form.

Dematerialization has several benefits such as faster and more efficient transactions, lower transaction costs, increased transparency, and reduced risks associated with physical securities.

Features and Benefits of a Demat Account?

about share trading

After knowing what is demat account and how it holds and tracks the investors’ securities in digital form, here is a walk through on key features and benefits of having a Demat Account in India:

Look for following best demat account features:

Ease of Account Opening:

You should open a zero brokerage demat account with a DP that offers ease of account opening. Herein, it is also important to review the status of their software-and-user-interface. The trading platform should be easy to operate.

Safety and security:

Do choose a Demat Account that offers a safe and secure platform for online transactions.

Easy access:

You should be able to access the account online or through mobile app with convenience, so that you can transact from location of your choice, with complete ease.

Automatic updates:

Your broker will provide automatic updates on corporate actions such as dividend declarations, bonus shares, and rights issues related to your demat account.

Nomination facility:

Demat accounts provide the facility to nominate a person who will receive the securities in case of the account holder's death.

Low costs:

With demat account you will pay a nominal annual maintenance charge. Most DPs offer free demat account and waive off AMC for first year. Do check trading cost and brokerage fee plans.

Recommended Read: Tips for investing in sip to maximize your returns

There are several benefits of Demat Account

Faster Transactions:

Demat accounts offer faster and more efficient transactions, reducing the time required for processing physical certificates.

Reduced Risk:

Demat accounts eliminate the risk of physical certificates getting lost, stolen or damaged, thereby reducing the risks associated with holding physical certificates.

Easy Tracking:

Investors can track their investments easily with a Demat account, as they can view their holdings and transaction history in one place.

Types of Demat Account

Your broker or depository participant primarily offers three types of Demat Accounts. Let’s know about demat accounts below:

1. Regular Demat account:

This is a regular trading & investment account for Indian residents. The demat account can be opened with a Depository Participant (DP) and can be operated through an online trading platform. Primarily investors who tend to trade in equity shares alone opt for regular demat account. The BSDA comes under Regular Demat Accounts only.

2. BSDA (Basic Services Demat Account):

The Basic Services Demat Account is designed for small investors who hold securities worth less than Rs. 2 lakhs. The account offers a lower account maintenance fee and is an affordable option for small investors.

3. Repatriable Demat Account:

As the name suggests Repartriable demat account is meant for Non Resident Indians (NRIs). This account allows investors to transfer their funds abroad. The account needs to be linked with a Non-Resident External (NRE) bank account to repatriate the funds to the home country.

4. Non-Repatriable Demat account:

This Demat account is for NRIs who want to invest in Indian securities and do not want the option of repatriation of funds. The account does not allow the transfer of funds outside India.

5. Corporate Demat Account:

Companies and corporations participate in the stock market with Corporate Demat Account.

How does Demat Account Work ?

The Demat Accounts works like a bank account. To understand the working of a demat account, know that a demat account must be linked with a trading account. Further the trading account is linked to a bank account.

When you make a stock purchase through your Demat Account on broker’s app/ website, your depository participant or broker forwards your 'buy' order to the stock exchange. The exchange matches the 'buy' request with other investor’s corresponding 'sell' request. Once your order is matched, an order is sent to a clearance house to settle the trade.

After transaction settlement, the shares are credited to your Demat account at the end of the trading day. Alongside, the Demat account of the seller is debited for the same unit of shares sold.

How to Open a Demat Account?

You can open online Demat Account in ten minutes with a depositary participant. Here are the steps to follow:

Choose a Depository Participant (DP):

This is a pre-step. The DP is a registered intermediary that lets you open a Demat Account for holding securities. Most DPs also provide stock broking service. Do choose a DP that offers you comprehensive Demat & Trading Account service on a customer friendly trading platform.

Fill the Demat Account opening form –

Next, open a Demat account by filling in accurate personal details, bank account details, and KYC documents such as PAN card, Aadhaar card, and address proof.

Submit the form and documents -

Submit the filled account opening form along with the required documents to the DP.

Complete the in-person verification (IPV) -

The DP will conduct an in-person verification of your identity and address provided.

Sign the agreement -

Sign the DP-client agreement, which outlines the terms and conditions of holding a Demat account.

Receive Demat account details -

Once the account is opened, the DP will provide you with the Demat account details, including the account number and login credentials.

Start trading –

Now you can start trading in securities.

Why open Demat account with Religare Broking?

Religare Broking is a leading financial services company in India and offers a range of investment products and services, including Demat account services. Here are some reasons why you may want to consider opening a Demat account with Religare Broking:

Seamless account opening process:

Religare Broking offers a seamless and hassle-free account opening process. You can open a Demat account with Religare Broking online by filling up a simple application form and submitting the required documents.

Multiple investment options:

Religare Broking offers a range of investment options according to the needs and preferences of different investors. You can invest in equity, derivatives, commodities, mutual funds, and more through Demat Account with Religare Broking.

Advanced trading platforms:

Religare Broking offers advanced trading app Religare Dynami that enables you to trade seamlessly and efficiently. You can trade on the go using the mobile app or access through desktop trading platform.

Research and advisory services:

Religare Broking offers research and advisory services that provide you with insights into market trends, investment opportunities, and trading strategies. You can use these services to make informed investment decisions.

Customer support:

Religare Broking provides excellent customer support through multiple channels, including phone, email, and chat. You can reach out to their customer support team for assistance with any queries or issues related to your Demat Account.

In all, opening a Demat account with Religare Broking offers several benefits, including a seamless account opening process, multiple investment options, advanced trading platforms, research and advisory services, and excellent customer support.

Documents required for demat account opening

The documents required for opening a Demat account in India are:

• Permanent account number (PAN)

• Aadhaar Card - An Aadhaar card is mandatory for completing the KYC process. In the absence of an Aadhaar card, other identity proof documents such as a passport or driving license can be submitted.

• Address Proof - A valid address proof such as a passport, driving license, voter ID, or utility bill is required for completing the KYC process.

• Bank account details - The bank account details such as the account number, IFSC code, and bank statement are required to link the bank account with the Demat account.

• Passport-sized photographs - Passport-sized photographs of the account holder are required for completing the account opening process.

It is important to note that the exact document requirements may vary depending on the Depository Participant (DP) chosen and the type of account being opened. It is recommended to check with the DP for the exact list of documents required for opening a Demat Account.

Demat account Fees & Charges

Opening and maintaining a Demat Account in India involves nominal fees and charges, which may vary depending on the Depository Participant (DP) and broking services chosen.
Here are some common fees and charges associated with a Demat account:

Account opening charges:

Most DPs charge a one-time account opening fee, which ranges from Rs. 100 to Rs. 1,000 depending on the DP.

Annual maintenance charges (AMC):

DPs charge an annual maintenance fee for maintaining a Demat account. The AMC can range from Rs. 300 to Rs. 1,000. Again, this varies for each service provider.

Transaction charges:

DPs charge transaction fees for buying and selling securities. The transaction fees can be a percentage of the transaction value or a fixed amount per transaction.

Other charges:

DPs may also charge additional fees for services such as account modification, account closure, pledge creation, and rematerialization.

It is important to note that the exact fees and charges may vary depending on the DP and the type of account you have opted for. It is recommended to check with the DP for the exact fee structure and charges associated with a Demat account.