opening a demat account

What Is Demat Account?

A demat account for shares is exactly like a bank account for your money. To simply put, a demat account is what holds the certificates of
all your financial instruments like equities, commodities, currencies and mutual funds in electronic or in dematerialized form.
Without a demat account, one cannot trade in the stock market.

Growth Of Demat Account In India

This data is on the basis of a research work in August 2015

  • Total population in India is 125 crore
  • 2.4 crore people have demat account which means only 2% of the total population invests in stock market

 

Source credit:
http://www.indiansharemarket.org/number-of-demat-account-in-india/

How Demat Account Works?

Central Depositories:

Demat accounts are held by two central depositories CDSL and NSDL, which hold all the details of your shareholding on your behalf like a bank.

Depository Participants:

Depository participants or DPs facilitate you to have an access to the central depository. In other words, they are the intermediaries between the central depository and the investors. They could be a bank, financial institution or an online broker who provides you with a unique ID to have an access to your central depository.

Portfolio Holding:

Demat account holds your portfolio. Therefore, when you login to your account, you can view all the details of your securities, which get automatically updated after every transaction – whether you buy or you sell.

Basic Steps To Open A Demat Account?

Select a broker/online trading firm

Fill up an account form and submit the KYC documents along with a passport-sized photograph

The broker will check the details, verify and open an account within 2 to 3 working days, providing you with the account number called Beneficial Owner Identification Number (BOIN)

Benefits Of Having A Demat Account

 

No Chance Of Theft

With an electronic demat account there is no chance of your share certificates being stolen. They remain absolutely safe in your account, unlike traditional method of trading.

 

Quick And Easy Transfer

Gone are the days when shares were sent through registrar or company to transfer it to an individual’s name which would nearly take days or months. Now shares get transferred immediately to a demat account, which in turn increases the efficiency and effectiveness of the share market.

 

Reduces Cost

No stamp duty required on transfer of securities to the demat account, which further reduces the overall transaction cost.

 

All Investments Under One Roof

In a demat account you can keep all your investments, including mutual fund, gold exchange, and equity. This helps you to keep track of all your investments under one roof.

 

You Can Now Nominate

Like a bank account, you can now nominate individuals while opening a demat account.

 

SPEED E-Facility

Both the depositories NSDL & CDSL now allow the demat account holders to send instruction slips electronically, which in turn reduces the overall time of the procedure and increases the convenience.