Demat Account refers to dematerialized account. An investor who wants to buy or sell securities from stock exchange is required to receive deliveries in dematerialized form. To make deliveries of these securities, you are required to open a depository account or demat account.
Since January 1999, SEBI has made it compulsory for all investors to settle their trade in demat form except few cases.
To open a demat account you need to approach a depository participant registered with SEBI. These depository participants will work as an intermediary between the investor and depository i.e. NSDL or CDSL.
Depository is a place where the stocks of investors are kept in electronic form. In India we have ICICI bank, Axis Bank, IDBI bank, HDFC, Kotak Securities, Sharekhan, Motilal Oswal and many others who are approved by SEBI to work as a depository participant. Once you approach these people, you will be guided through the formalities that are required to open a demat account.
Also Read: How to research a stock before investing in share market
You have to fill up demat account opening application form and sign an agreement with the DP in the depository prescribed standard format.
This agreement specifies the rights and duties of investor and DP. Along with these, you are also required to submit documents towards your identity proof and address proof.
Documents required for opening a demat account
You are required to submit self attested documents for opening your demat account. These copies are to be verified with originals by the concerned person of depository participant.
Passport Size photograph
Recent passport size photos are required to be produced to the depository participant for opening the demat account.
Pan card
PAN card issued in the name of the applicant is a must for opening a demat account. Self attested copy of PAN card stating your name, father’s name, date of birth and pan number has to be produced before the depository participant.
If correction to the details in PAN card is required to be done then first get the details corrected and then apply, otherwise your application may get rejected.
Documents as proof of identity
As per the guidelines, certain documents are collected as a proof of identity of the person who is willing to open a demat account. These are; PAN Card, voters ID, passport, Driving license, Bank attestation, Income Tax return, Electricity bill, landlines phone bill.
Documents as proof of address
Similarly lists of documents are specified for accepting it as a proof of address. These are; Ration card, passport, voter ID, Driving license, Bank passbook or statement, electricity bills, telephone bills.
In addition to the above ID and address proof, identity card or document issued by any of the central government or state government or statutory authorities or PSUs or Commercial bank or Public financial institutions or professional bodies such as ICAI, ICWAI or ICSI or bar council etc to their members will also be accepted as ID or address proof.
Demat account Fees
Demat account fees vary from one depository participant to another. Generally these are charged under two major heads i.e. annual maintenance fee and transaction fee. Annual maintenance fees are collected per annum by the depository participants for yearly maintenance of demat account.
Transaction fees are based on your transaction that you do in your demat account. Certain depository participants use to have corporate offers under which investors opening demat account under that scheme will not be required to pay any annual maintenance fee.
Once your demat account opening form is processed, your depository participant will provide an account number or client ID. This client ID is also called beneficial owner identification number. When you buy or sell shares online, it will be credited or debited to this demat account.