Demat Account

Lets understand the Demat account meaning with an example:

Suppose you purchase 100 shares of ABC Company. Instead of getting physical share certificates, these shares are electronically credited to your Demat account which is managed by a depository participant (DP), typically your broker.

If you hold shares in various companies, all of them will be listed in your Demat account, simplifying the tracking and management of your investment portfolio.

Demat Account Summary

• The full form of Demat account is a dematerialised account.
• Demat account is an electronic account used to hold shares and securities in digital format.
• It is essential for stock market investments.
• Dematerialization replaces physical share certificates with electronic records.
• Facilitates easy buying, selling, and tracking of investments.
• Holds various securities like shares, bonds, mutual funds, ETFs, and government securities.
• Introduced by NSE in 1996, initially manual, now fully digital.
• Offered by depositories like NSDL and CDSL through intermediaries (stockbrokers).
• Demat accounts enhance security, reduce risks, and improve governance in the stock market.
• Charges may apply based on account type, volume, and broker's terms.
• Free Demat account is offered by some intermediaries like choice.
• Some intermediaries like Choice also offer free demat account opening.

1. Easily Accessible

   With internet connectivity, you can access your Demat account 24/7 to monitor holdings and execute transactions from anywhere.

2. Safety and Security

   Demat accounts offer unparalleled safety for your financial assets, significantly reducing the risk of loss or theft.

3. Elimination of Paper Certificates

   With Demat accounts the shares are stored in digital form making them easily accessible eliminating the need to manage the physical share certificates. Additionally, unlike physical share certificates, demat holdings do not require stamp duty, saving you additional costs.

4. All in one account

   A Demat account acts as a secure storage for your financial assets like shares and securities, bonds, ETFs, debentures and more. This consolidation simplifies asset management and facilitates tax filing with all your records in one place.

5. Easy Transmission

   In the unfortunate event of a Demat account holder's demise, assets can be seamlessly transferred to the next of kin. This ensures a hassle-free process compared to physical certificates.

1. Regular Demat Account

   Ideal for Indian residents, this account is managed by depository participants, and regulated by two depositories. It offers swift transactions, allowing you to buy or sell shares within minutes. Regular Demat accounts could be categorized into:
   
   Minor Demat Account: Specifically designed for minors, this account allows parents or guardians to manage investments on behalf of their children until they reach the legal age of 18. Opening a minor demat account offers a secure way to build a financial foundation for the younger generation.
   
   Corporate Demat Account: A Corporate Demat account is a type of Demat account that is tailored for corporate entities and organizations. It enables businesses to hold and manage their securities electronically, facilitating smoother transactions and enhanced financial control. Corporate Demat accounts are instrumental in corporate actions and shareholder meetings.

2. Repatriable Demat Account (NRI Demat Account)

   It’s a type of demat account designed for NRIs so that they can leverage this account to transfer funds abroad . It requires an NRE bank account for operation.

3. Non-Repatriable Demat Account

   This is also intended towards NRIs but unlike the repatriable demat account, in a non-repatriable demat account, funds cannot be transferred abroad. It necessitates an NRO bank account association.

4. Basic Services Demat Account

   Designed to promote financial inclusion, the Basic Services Demat Account caters to individuals from economically disadvantaged backgrounds. Offering a simplified and cost-effective way to participate in the Indian securities market. This type of account is subject to certain restrictions and limitations, making it an accessible entry point for new investors with limited resources.

Account opening - Stock brokers help you open a Demat account and in return they charge some fees in order to maintain the same.

Link it with a trading account - In order to carry out your trading activities, you need to link your demat account with a trading account. Now-a-days opening a trading account doesn’t require any individual process as brokers open it alongside while one opens a demat account and hence they are already linked to each other.

Order placement - Your Depository Participant (DP) forwards your buy orders to the stock exchange when you make purchases via a trading platform.

Settlement - Once your buy order matches with a corresponding sell order, the stock exchange sends it to a clearinghouse for settlement. At the end of the trading day, the shares you've bought are credited to your Demat account. Similarly, the seller's Demat account is debited for the sold shares.

You can know the working of the demat account in detail with our informative resource blogs.

1. Proof of Identity:
   1. Aadhar Card
   2. Passport
   3. Voter ID
   4. Driver's License
   5. PAN Card
2. Proof of Address: Acceptable documents include:
   1. Passport
   2. Voter ID
   3. Driver's License
   4. Aadhar Card
   5. Recent utility bill (electricity, water, gas, etc.)
   6. Bank statement
3. PAN Card(mandatory)
4. Passport-Size Photographs: Typically, you need 2-3 recent passport-sized photographs if you opt for the offline process. For the online process, it will be e-KYC authentication.

Ensure that all documents are self-attested copies, and keep the original documents handy for verification purposes during the demat account opening process.

Opening a Demat account is often free or even if it's charged, it usually requires a nominal fee. Other than the opening fees, there are various fees and charges associated with maintaining and using it. Some common Demat account charges include

1. Annual Maintenance Charges (AMC)

2. Transaction Charges

3. Debit Transaction Charges

4. Dematerialization Charges

5. Rematerialization Charges

6. Pledge Charges

7. POA (Power of Attorney) Charges

8. Custodian Fees

9. Failed Transaction Charges

10. Account Closure Charges

11. Stamp Duty

Know in detail: Types of demat account charges

It's crucial to understand the fee structure of your chosen DP and Demat account to avoid any surprises. Some brokers offer zero AMC Demat account, making it cost-effective for investors.

Choice offers one of the most cost-effective brokers. Unlike discount brokers we offer multiple services at a very low brokerage charges.

Most brokerage firms, including Choice, allow you to open a Demat account online, making the process more convenient and efficient. Since the process is online, it is quick, simple, and paperless.

The process of opening a Demat account online with Choice involves:

Step 1: Visit Choice’s website and click on the “Open Free Demat Account”.

Step 2: Start the process by entering your mobile number and verifying the OTP.

Step 3: Provide your PAN number and Date of Birth (DOB) to move forward with the account opening process.

Step 4: Allow permission to fetch your required details from KRA agencies and CKYC agency CERSAI respectively.

Step 5: Enter your basic details, including mobile number, email ID, occupation, educational qualification, and whether you are a politically exposed person.

Step 6: Verify your email by entering the OTP sent to your inbox

Step 7: If you have your required documents in DigiLocker, you can allow access to fetch them.

Step 8:Start the KYC process: Your documents will be automatically

• Fetch documents from Digilocker -
  • You’ll be required to enter your Aadhar card number to allow your documents to be fetched from DigiLocker.
  • Verify the OTP you’ll receive on your number linked to your Aadhar card.
  • Enter your 6-digit DigiLocker Security PIN.
• Click and upload a selfie
• Draw or upload your signature
• Upload a copy of your Aadhar Card
• Upload a copy of your PAN Card

NSE Circular: Individuals referring clients to trading members must be registered as Authorized Persons. This ensures investor protection and compliance with regulations. Trading members are reminded to adhere to SEBI guidelines on brokerage sharing, account opening, and ethical trading practices.

Investor Confidence: Substantial increase in new demat accounts despite recent volatility in the market.

Investment Limits Raised: The Securities and Exchange Board of India (SEBI) has significantly increased the value of securities that can be held in basic-services demat accounts. BSDA maximum account value limits exceeded to ₹10 lakhs from the previous limit of ₹2 lakh.

Nominee Flexibility: Non-submission of a nominee will not result in the freezing of mutual fund portfolios or demat accounts. SEBI clarifies extention of deadline.

Record-Breaking Openings: January witnessed a surge in new demat accounts, exceeding 46.84 lakh amidst volatile market.

Demat Transactions Simplified: SEBI's introduces "DDPI Authorization" a new method for demat transactions.

Got questions? Explore our FAQs for answers to common questions and concerns related to Demat account. If you need further assistance or personalized guidance, feel free to contact us.

• What is the eligibility to have a demat account?

  Age - There is no minimum age criteria. Individuals above 18 years are eligible for a regular demat account while the ones below 18 can open a minor demat account. Their parents or guardians will be in-charge of the account until the minor comes to age.
  
  Citizenship - Must be Indian Citizen residing in India. Indians not residing in India can open a NRI Demat Account.
  
  Other requirements - Have valid pan card & a valid address proof (Aadhar, Voter ID, Passport, Driving License)

• Is Demat account safe?

  Demat being a digitalised account is regulated by SEBI, and registered under NSDL and CDSL. However being associated with a reputed broker like choice ensures safety.

• Can I have multiple Demat accounts?

  Yes, you can have multiple Demat accounts, but there are regulatory restrictions. Each account must have a different purpose or ownership structure.

A glossary of key terms and phrases related to Demat accounts to help you better understand the world of electronic securities and investments:

1. Depository: An organization or institution responsible for holding and safeguarding financial securities in electronic form.
2. Depository Participant (DP): An intermediary or agent authorized by the depository to offer Demat account services to investors.
3. Client ID: A unique identification number assigned to each Demat account holder by their DP.
4. Dividends: Payments made by companies to their shareholders from profits.
5. Bonus Shares: Additional shares issued to existing shareholders by a company as a reward.
6. Corporate Actions: Actions taken by a company that may affect shareholders, such as dividends, bonuses, or splits.
7. Loan Against Securities: Using Demat account holdings as collateral for loans.
8. Market Orders: Orders to buy or sell securities at the current market price.
9. Limit Orders: Orders specifying a specific price at which to buy or sell securities.
10. Stop-Loss Order: Orders automatically selling shares when reaching a predetermined price to limit losses.
11. Nominee: An individual nominated to inherit assets held in a Demat account in case of the account holder's demise.
12. Portfolio: A collection of investments held in a Demat account, including stocks, bonds, and mutual funds.
13. SEBI (Securities and Exchange Board of India): The regulatory authority overseeing Demat accounts and the securities market in India.
14. Transaction Charges: Fees applied each time securities are bought or sold.

If you have any further questions or need clarification on any of these terms, please refer to our comprehensive guide or reach out to us for assistance.

Thank you for choosing our comprehensive guide to learn about Demat accounts.