What is a Demat account?
Similar to a Bank account which holds your Money, Deposits etc, A Demat account or an online demat account is the account which holds Shares, bonds, government securities, mutual funds and exchange traded funds (ETFs). In simple terms, a demat account is a must have and first step for transacting in the share market.
In 1875 at BSE, Stocks were traded in the “Ring”, Traders shouted their prices to buy or sell; once the trade was executed, money was exchanged for share certificates. Settlements took a lot of time because of huge amount of paper work involved in manually keeping a track of shares sold/bought and later settlement of these transactions. Thanks to technology we moved to a digital age and everything turned electronic. In 1996 Demat accounts were introduced and after dematerialization process all physical share certificates were converted in to electronic form and the same deposited in to Share holders Demat Account.
What are the Benefits of a Demat Account?
Demat Account has made life a lot simpler bringing in paper less transactions avoiding all manual processes. There are many benefits to Dematerialization process
1) Common account – Does not matter you have multiple bank accounts and trading accounts, your single Demat account details are with all participants and all your Bonds, Investment Instruments , Shares are deposited in your common Demat account
2) Auto Update – Your Demat account details are automatically shared with third parties, you need not keep submitting your Demat account details everywhere you transact in shares, bonds or mutual funds
3) Lower cost – Paperless transaction has cut down cost drastically also avoiding stamp duty and registration compared to previous Trades executed manually
4) Safe and Secure – Demat account transactions are safe and secured; also it avoids fraud by eliminating the chances of receiving duplicate shares, Theft, Wrong deliveries. Because of paper less transactions it has also reduced the time frame of deliveries.
How does a Demat Account work?
In Today’s Scenario you cannot Trade in Stock markets without a Demat Account. Demat Account acts as your Bank for your Shares, Government Bonds and Mutual funds. Depositories hold Shares, Mutual funds etc on behalf of the holder and the Intermediaries act as Depository Participants who facilitate account opening
Depository participants: Depository participants are intermediary who are authorized to offer Demat services. They can be Your Bank, Stock Broker or other financial institutions. SAMCO Securities is one such Depository Participant. You can open an account online with SAMCO Securities by registering here .
Each Demat Account number has a Unique Identification Number. Whenever you Buy Shares they automatically get deposited in to your Demat account. Unlike other accounts you need not provide your Unique ID every time you trade.
How to Open a Demat Account?
Here are 5 Simple steps to open a Demat Account
Step 1: Select your Depository Participant like SAMCO Securities
Step 2: Fill up the form and attach the required documents
Step 3: Submit the form and said the required documents. PAN card is compulsory for opening a Demat Account
Step 4: In person verification by an Employee of the Depository Participant
Step 5: Account Number and Details provided by the Depository Participant
Fees and Documents required for opening a Demat Account
Fees: You would have to pay a fixed annual fee for opening a Demat Account which is the Annual maintenance Charge for Demat Account. Depository participants may at their own will also charge an account opening fee. However Discount brokerages like SAMCO Securities offer free online demat accounts with no account opening fees. Other than maintenance fees the DP – Depository participants charge a Variable fee on transaction basis. This fee is charged either on Buying or Selling Instruments and usually is either a fixed fee per transaction or a percentage of your transaction size. Understand the Demat Charges with SAMCO Securities.
Documents required for opening a Demat Account
You broadly require 2 Kinds of documents to open a Demat account
1) Identity proof
- PAN Card
- Voter’s ID
- Driving License
- Aadhaar Card
ID cards with applicant’s photo issued by the central or state government and its departments, statutory or regulatory authorities, public sector undertakings (PSUs), scheduled commercial banks, public financial institutions, colleges affiliated to universities, or professional bodies such as ICAI, ICWAI, ICSI, bar council etc.
2) Address proof
- Ration card
- Voter ID card,
- Driving license,
- Bank passbook or Bank statement
- Verified copies of electricity bills or residence telephone bills,
- Leave and license agreement or agreement for sale
Self-declaration by High Court or Supreme Court judges, identity card or a document with address issued by the central or state government and its departments, statutory or regulatory authorities, public sector undertakings (PSUs), scheduled commercial banks, public financial institutions, colleges affiliated to universities and professional bodies such as ICAI, ICWAI, Bar Council etc.
Go Ahead and open a demat account with one of India’s leading discount broker and low cost depository participants – SAMCO Securities.
You should usually select a SEBI registered intermediary who offers 2-in-1 accounts i.e. Demat accounts and Trading accounts. This can result in significant ease of transacting and operating the accounts. If you need information on how to select a stock broker, click here.