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What is a Demat Account? open online, Types, Opening charges, documents Required, And tips

What is a Demat Account? open online: In this post, we will know what is a demat account and how to open a demat account with your valid documents and bank details.

SEBI has clearly said that shares and securities cannot be transacted in any other way except Demat Account .

There are two depositories in India for this –

  1. NSDL (National Securities Depository Ltd)
  2. CDSL (Central Depository Services Ltd)

What is a Demat Account?

A demat account is an account that allows investors to hold shares or securities in electronic form. The purchased shares are credited to the demat account and similarly at the time of sale, the securities are debited from the account. This account is used to hold a wide choice of investments such as shares, ETFs, mutual funds, bonds, government bonds, etc.

The process of dematerialization of shares was initiated in 1996 for judicial use of electronic trades. Dematerialized or demat account helps to hold shares in electronic mode and helps people to buy shares and collect income in case of sale in a secure manner.

Demat account types:

There are three different categories of demat accounts which are mentioned below:

1. Regular Demat Account

A regular demat account is a type of demat account that is suitable for investors or traders who are Indian residents.

2. Repatriable Demat Account

A repatriable demat account is a type of demat account that is suitable for investors or traders who are non-resident Indians (NRIs). This type of demat account allows transfer of capital abroad. However, a non-resident external (NRE) bank account is required.

3. Non-Repatriable Demat Account

Non-repatriable demat account is a type of demat account which is again suitable for non-resident Indians (NRIs), but there is no transfer of funds abroad. A Non Resident Ordnance (NRO) bank account is required to be associated with this type of demat account.

Demat account benefits:

There is no doubt that a demat account has completely changed the way we work in the stock market and has made the process of sharing transactions secure and easy, eliminating the manual process.

With this, Demat Account has brought many benefits to the market –

  • Low Cost
  • Paperless
  • Digitization
  • Auto Update
  • No Stamp Duty
  • Transfer ease
  • Secure Process

There are several benefits of Demat account which are mentioned below:

1. Easiness

Demat accounts provide easy access to investment and transaction statements through net banking. Transaction and investment details can be easily tracked through a demat account.

2. Simple dematerialization of securities 

On the request of the Depository Participant (DP), certificates in physical form can be easily converted into electronic form, and vice versa.

3. Low risk

Keeping securities in physical form carries the risk of theft or loss. But these risks are completely ruled out through a demat account that allows the investor to store securities in electronic form.

4. Ease of transfer of shares

Transfer of shares on trades has also become a much simpler process through demat account as some of the expenses incurred in physical securities such as stamp duty and other charges are eliminated. The total cost and time taken for transfer to the investor’s account is also reduced.

5. Encashment of shares 

Encashment or sale of shares through demat accounts has become a very simple and quick process.

6. Debt in exchange of securities

A demat account holder can easily avail loans against securities held in the account. In other words, securities in a demat account can be used as collateral to obtain loans.

7. Factor of Globalization

Demat accounts play an important role in providing easy access to Indian stock markets to global investors. And hence, helps in getting foreign investment in the country.

How to open a demat account online?
How to open a demat account online?

How to open a demat account online?

Demat account opening is a very simple and hassle free process. The steps to open an account are given below:

  1. Select Depository Participant (DP).
  2. Fill the account opening form with the required details and submit the necessary documents with it. PAN card is mandatory for opening a demat account.
  3. After submission of the form, a copy of the rules and regulations, terms of agreement, fee will be provided by the depositing participant.
  4. In-person verification is also mandatory and therefore, a member of the DP officer staff will have to contact the person to verify the details provided as opening an account.
  5. After verification, the DP staff member will give an account number or customer ID. These details can also be checked online.
  6. An annual maintenance fee is also charged for the demat account which covers the account transaction fee. These charges are applicable as per the structure prescribed by the DP.
Opening Charges for a Demat Account 
Opening Charges for a Demat Account

Opening Charges for a Demat Account 

To open a Demat Account, you have to pay a certain fee –

  • Account Opening Fees
  • Annual Maintenance Fees
  • Guardian’s Fees
  • Transaction Fees

There are different charges of different companies. Talking about the rest of the transaction charges, the Average Per Transaction is ₹ 20 Rupees charge.

Important  documents for a Demat Account

To open a Demat Account, you will need the following documents –

  1. Aadhaar Card
  2. PAN Card
  3. Income Proof
  4. Bank Proof
  5. Passport Size Photo
  6. Signature on Single Paper
  7. Demat Form (If you going with offline process)

Tips to choose a best demat account

I would like to advise you here that you can create your own demat account in whichever company, but remember few points-

  • Easy to use
  • Safe for long term
  • Low fees and charges
  • Must be a reliable demat

Demat Account – Frequently Asked Questions

1. What are the types of Demat accounts?

Demat accounts are of three types: regular demat account, repatriable demat account and non-repatriable demat account.

2. Can a loan be taken through a Demat account?

Demat account holders can easily avail loans through securities held in their account.

3. What is the minimum balance of securities in a demat account?

There is no minimum balance of required securities in the demat account.

4. What is DP?

DP means depository participants who act as intermediaries between depositories like NSDL and CDSL. Similar to a bank, traders can open their demat account with DP along with other facilities that allow them to invest or trade.

5. Is part dematerialization allowed?

Yes, investors can dematerialize their holdings in whole or in part.

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