Demat Account

What is a demat account and why it is required?

Shares and securities are held in dematerialised form in demat account. It is mandatory to have a demat account to carry out a transaction in stock exchange. Once an account is opened, you can buy shares by visiting a broker personally or online.

How to open a demat account?

To open a demat account, you need to get in touch with a registered depository participant (DP). It is just like a bank or broker. You can get a list of registered DPs from NSDL or CDSL websites, then download or collect an account opening form from the registered DP's office or website. It usually takes a week or two to open your account. It is important to add nominee while applying for demat account.

You can open a demat account with banks. However, banks have an option of opening an account with any branch while some have a set of selected branches.

Are there any charges levied on demat account?

Account opening charges vary from bank to bank. Some private banks such as HDFC Bank and Axis Bank do not charge account opening fee while others may charge. The fees are also refundable. Other types of fee charged are annual maintenance fee, custodian fee and transaction fee.

What is depository?

A depository is an organisation which holds securities like shares, debentures, bonds, government securities, mutual fund units etc. of investors in an electronic form. The securities are held at the request of the investors through a registered Depository Participant. The depository also provides services related to transactions in securities.

What is dematerialisation?

Dematerialisation is the process by which physical certificates of an investor are converted to an equivalent number of securities in an electronic form and are credited into the beneficiary's account with his DP.

Can multiple demat accounts be opened?

Yes, you can open more than one account at the same name either with same or different Depository Participants (DP). An investor has to fill the KYC form every time he opens a new account. The KYC norms include Proof of Identity, Proof of Address requirements as stipulated by SEBI and PAN number. The investor has to show the original PAN card at the time of opening of demat account.

What is rematerialisation?

The process to convert shares back to the physical holding is called as rematerialisation. He needs to fill remat request form (RRF) and request his DP to rematerialize the shares in his account.

Can an investor operate a joint account?

No, an investor cannot operate a joint account on 'either or survivor' basis like a normal bank account. But if the beneficial owner authorises any person to operate his account by executing a power of attorney and submitting it to the DP, that person can operate the account on behalf of the beneficial owner.

Is there any rule to keep minimum balance of securities in demat account?

No, there is no such rule to keep any minimum balance in demat account.

Who is the registered depository in India?

Depository registered with SEBI are called as registered depository and currently there are two registered depositories - National Securities Depository Ltd (NSDL) and Central Depository Services Ltd (CDSL).

What are the benefits of dematerializing securities?

There are various benefits of dematerializing securities such as

  • It is a convenient and safe to hold securities in demat form
  • Smooth and immediate transfer of securities
  • You don't need to pay any stamp duty on transfer of securities
  • Minimizes your paper work
  • Elimination of risks associated with physical certificates such as bad delivery, fake securities, delays, thefts etc.
  • There is no odd lot problem (you can even trade single share)
  • Reduction in transaction cost

What are the KYC norms to open a demat account?

KYC (Know Your Customer) is a customer identification process, which is done to prevent any criminal activity. SEBI has made it mandatory to fulfill the KYC norms in order to open a demat account. These norms include

  • Proof of identity: PAN card with photograph, voter id card, passport, Aadhar card
  • Proof of address: This includes your ration card/ passport/bank account statement, driving license, utility bills like electricity bill, telephone bill. (PAN card is compulsory)
  • You need to give your bank account number to open a DP account.