What is a Demat Account?

Finance Guru Speaks: Demat refers to a Dematerialised Account.

Just as you have to open an account with a bank if you want to save your money, make cheque payments etc, you need to open a demat account if you want to buy or sell stocks. So it is just like a bank account where actual money is replaced by shares.

You have to approach the DPs (remember, they are like bank branches), to open your demat account. DPs can be Kotak Securities, Share Khan, India Bulls, ICICI Directs etc.

Let's say your portfolio of shares looks like this: 40 of IOC, 25 of TCS, 45 of RIIL and 100 of INFY.

All these will show in your demat account.

So you don't have to possess any physical certificates showing that you own these shares. They are all held electronically in your account.

As you buy and sell the shares, they are adjusted in your account.
Just like a bank passbook or statement, the DP will provide you with periodic statements of holdings and transactions.

A Demat account is a must for trading and investing.

Get your documents in place

Once you approach your DP, you will be guided through the formalities of opening an account.
You must fill up an account opening form and sign an agreement with your DP.

The DP will ask for some documents as proof of your identity and address.
Check with them what they require. For instance, some may accept a driver's license, others may not.
 

Here is a broad list (you won't need all of them though):

* PAN card
* Voter's ID
* Passport
* Ration card
* Driver's license
* Photo credit card
* Employee ID card
* Bank attestation
* IT returns
* Electricity/ Landline phone bill

While they only ask for photocopies of the documents; they will need the originals for verification.
You will have to submit a passport size photograph on which you sign across.

The charges for account opening, annual account maintenance fees and transaction charges vary between DPs. To get a comparative idea, visit the websites of NSDL and CDSL.

You can nominate whoever you like by filling up the nomination details in the account opening form. This is to enable the nominee to receive the securities after the death of the holder of the demat account.

All set?

When you open an account, the DP will allot a unique BO ID (Beneficial Owner Identification) Number, which you need to quote for all future transactions.

If you want to sell your shares, you need to place an order with your broker and give a 'Delivery Instruction' to your DP.

The DP will debit your account with the number of shares sold. You will receive the payment from your broker.
 

If you want to buy shares, inform your broker about your Depository Account Number, so that the shares bought are credited into your account.

It's that simple.

Now get that account! :-)

 

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