What is Demat account and its importance
If you follow or invest in the stock market you must have definitely heard of Demat account. You can own and track your investments easily as Demat account stores your shares in electronic form.
A Demat account can be opened & operated by an adult or minor Individual, Resident Indian or NRI, Trust, HUF and Corporate. A guardian has to be appointed and documentation completed in case of a Minor account. In case of HUF, the Karta is the signatory whereas in case of Trust & Corporate the authorised signatory can operate the Demat account. NRIs from abroad can open accounts in India, investments can be made either on repatriation or non-repatriation basis under the Portfolio Investment NRI Scheme. An Individual Demat account can be opened in single or joint name but all the holders shall have to sign on the delivery slip while doing any transaction.
The National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL) are the two main depositories in India who hold all Demat accounts. However, accounts cannot be opened with these establishments directly and you will need to approach a depository participant (DP) authorised by these two main depositories. You can open a Demat with several banks, brokers/ financial institutions and online investment platforms who are authorised DPs.
- Select a DP – Choose a Depository Participant (DP) of your choice to open an account with; this entity will then be an intermediary between you and the main depository.
- Submit application – You will be given an account opening form by the DP which you need to fill up and submit. The application form will also include a standard agreement that states your rights and duties as an investor and the DP.
- Provide Documentation – You also need to submit necessary documents such as the KYC form, passport size photographs, residence proof, PAN card (Permanent Account Number) and proof of identity.
- Complete Verification – An authorised person from the DP’s office shall carry out an in-person or telephonic verification to ensure all the details you provided are correct.
- Receive Account number – Once the DP has processed your application and opened your account, you will receive a unique account number, known as Beneficiary Owner Identification Number.
The fees for opening and maintaining a Demat account varies with every DP. However, there are four basic types of fees associated with the account which include the account opening fee, custodian fee, transaction fee and finally the annual maintenance fee.
Advantages of a Demat account
- Holding your securities in Demat form is more convenient and safer than holding them physically.
- The costs and paperwork get reduced significantly.
- Holding stocks in electronic form has eliminated the risks of damage, theft, forgery, etc associated with physical certificates.
- You can now buy and sell a single share which was impossible earlier.
- There is no stamp duty levied when you transfer securities held in Demat.
- Any change in personal information can be communicated to every company you have invested in with a single instruction to the DP.
A subsidiary of Kotak Mahindra Bank, Kotak Securities is not just a stock broking firm but also a depository participant with NSDL and CDSL. You can trade in the Stock Market, invest in IPOs, Mutual Funds or Currency Derivatives using whichever mode that suits you best with them. You can now trade stocks online, offline or even on their stock trading app.
Open a Demat account and keep track of all your investments today.