The term “demat account” is widely used in the trading and investment industries. The popularity of these accounts reached a new height in 2018 when almost 4 million Demat accounts were opened, an increase of 13 % compared to the previous year. The increase is mainly due to the drastic change in Indians’ savings pattern from traditional instruments, such as stocks, to more accessible alternatives.
If you want to open a demat account, follow this article below to understand the steps and process.
What is a Demat Account?
A Demat Account or dematerialised account provides the facility of holding shares and securities in electronic form. Shares are purchased and stored in a Demat account while online trading to facilitate easy user trade. The Government of India established rules for demat accounts under the Depository Act of 1996 to reduce fraud, enhance market efficiency, and facilitate trade. A demat account is required for anyone dealing with financial assets, according to the Assets Exchange Board of India (SEBI).
How to Open a Demat Account Online?
It is more convenient to open a Demat account online. You can use a computer, laptop, tablet, or smartphone in minutes.
- You can find the official website of your preferred DP, such as IIFL Securities.
- Please enter your name, telephone number and city of residence in the simple lead form.
- An OTP will then be sent to your registered mobile number.
- Enter the OTP and the email address to receive the next OTP you need to join.
- Enter the details of the PAN.
- Specify the details of your bank account
- Use the Aadhaar to input your KYC details.
- Upload a selfie and a signature.
- You’re almost done with your job.
- E-Sign allows you to finish your verification.
- The Demat account has just been opened! You will receive details, such as a demat account number, via email and mobile.
- You can activate your F&O trading facility and add nominees now that your demat account is open.
An investor can hold multiple demat accounts using the same or other DPs and open numerous demat accounts if they provide each application’s required Know Your Customer details.
Benefits of a Demat Account
The advantages of the Demat account are as follows.
- It is convenient and time-saving for traders to make transactions at their convenience.
- The registration of transactions does not require a lot of tedious paperwork.
- A single integrated platform for debt management and equity instruments is available.
- In the case of bonuses, splits, mergers, consolidations, and so on, automatic credits are granted to a registered demat account.
- Since the securities are electronic, physical copies of share certificates, bonds, or other documents are not likely to be stolen, delayed, or faked.
- It eliminates the need to communicate more than once. eNotifications, which do not require contact with companies, traders, or investors, inform all stakeholders of a transaction.
- The changes to the address of every company an investor has invested in through a Depository Participant shall be updated.
- Unlike before, when shares were traded only in lots, a single share could be bought and sold.
- The removal of the stamp duty costs, which had previously been linked to tangible securities records, led to a sharp reduction in trading costs.
Things to Remember While Opening a Demat Account
If you’re a new investor in the market, you’ll need to pay attention to a few key points when opening a Demat. There are some of them out there.
1. It is essential to link
The opening of Demat will only be part of this task. You must have a trading account and link it to the Demat to start doing business. The Demat account is a depositary account to store your investments unless you have a trading account.
2. Be aware of charges
You should know that broker fees differ considerably between firms according to the type and nature of services provided. Depending on the style and frequency of your transactions, you must choose a discount or full-service broker.
3. Updating the correct data
Double-check all information you provide when opening an account. If you want to change your mobile number or email ID, you can update the same information with your DP to keep receiving regular updates to your account.
4. Add nominee
By adding a nominee to your Demat, you’ll be able to eliminate a lot of trouble in the future, like the transfer of shares. A nominee must be included at the beginning of your Demat to open it.
5. Be careful
Most payment processors send regular updates about transactions and activities on your account through SMS and email. The Demat account is safe but does not protect against fraudulent activity, so the investor is responsible for monitoring these activities and taking appropriate action as soon as possible.
Conclusion
Opening a Demat account is the initial step in starting an investor journey. But you’ll need a bank account, Demat account and trading account to open the business. The Demat account is only a deposit used to keep securities during trading. A bank account is required to carry out actual transactions, while a trading account needs to be used to convert the money into trade. To open a hassle-free demat account, check out the IIFL Securities.