A Demat account is necessary for trading in the stock market as all the securities that you purchase are held in it. It facilitates seamless online trading. With time, stockbrokers have integrated the latest technologies and user-friendly services in their online trading apps. Therefore, many investors are keen on opening an online demat account. However, before opening a demat account and knowing about the benefits of demat account, understand a little more about these key terms involved in the account opening process:
A Demat account facilitates the conversion of physical securities into electronic format. This process is known as dematerialisation. As the securities are available in an electronic format, you can track your holdings from any part of the globe.
Depository participants or DPs are the intermediaries or agents of investors who are registered with central depositories like NSDL or CDSL. These DPs provide basic trading services to investors.
A Step-by-Step Process to Open a Demat Account
It is easy to open an online demat account these days. You have to the simple steps that are given below:
Step 1: Selecting a DP
Select a DP who can either be an online trading platform, bank, or stock broker registered with either of the central depositories. Before opening a demat account, you must figure out the DP who can provide the demat services and features that you need for trading or investing.
Step 2: Fill & Submit the Account Opening Form Online
Go to the website of the DP and fill out an online account opening form. Choose a DP who offers a 2-in-1 account including demat and trading accounts. Some DPs even provide a 3-in-1 account if you want to open a new bank account for trading seamlessly.
Step 3: Fulfil the KYC Norms
To fulfil the KYC norms, the DP will ask for certain documents from you. It includes documents that validate your identity, bank details, income proof, and address proof. You can submit scanned copies of these documents online.
Step 4: Complete the Verification Process
Once you submit the necessary documents, the DP will ask you to attend an in-person verification round. Many DPs provide an online verification process by using a webcam or the camera of your smartphone.
Step 5: Sign the agreement
After completing the verification, you will need to enter an agreement with the DP. Read the agreement carefully as it will contain the rights and duties of both investor and DP.
Step 6: Get BO ID Number
BO ID (Beneficiary Owner Identification) number is a 16-digit code that is unique for each investor. It is also your online Demat account number that will be helpful for accessing the demat account. Upon successful completion of all the above steps, you will receive the BO ID number on your official email address.
Things to Remember While Opening A Demat Account
Remember these things while opening a demat account:
Link demat and trading account
These days, most DPs provide a demat account and trading account under a single roof. It means that you don’t have to bother linking both of these accounts. However, if you have opened a demat account and trading account from different brokers, you will have to link them to execute trades smoothly.
Remember that a demat account is only useful for holding your securities. It is your trading account that allows you to buy and sell securities online. Also, you must link your bank account with your demat account to transfer the funds to and fro as per the requirement.
Consider the demat account charges
While opening a demat account, check the brokerage fees charged by the DP. Also, find out the account maintenance charges, custodian fees, and other demat charges associated with a demat account. All these demat account charges will be mentioned on the statement of fees.
Go through these charges carefully before submitting the account opening form. You may also compare the demat account charges of several DPs to ensure that you are getting the best deal. Don’t choose the DPs who don’t reveal the brokerage and other demat charges upfront.
Fill the details correctly
Read the account opening form carefully and fill in the details correctly. Verify the details that you have entered in the form once before submitting it. If the details provided by you and those mentioned in the documents don’t match, your application will be rejected.
While filling out the demat account application, it is easy to miss the step that gives you the option of filing a nominee. It is recommended that you file the nominee while opening a demat account because you might forget to add a nominee later. Adding a nominee is important as it makes the transmission of the securities faster if you need it in the future.
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