Just like you need a bank account for everyday financial transactions like withdrawing funds from an ATM or transferring money between individuals, entering the realm of the stock market requires having a demat account.
Demat account
A dematerialized (demat) account acts as a digital depository for the financial securities purchased by an investor, storing them in an electronic format. This account streamlines the storage and management of financial securities, offering convenience and accessibility to investors.
Steps to open a demat account
The process of opening a demat account through a participating depositor is very simple and easy. It is similar to opening a bank account.
The demat account can be created by following four simple steps, as follows:
1. To open your demat account, you must first select a Depository Participant (DP) as per your convenience.
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2. A form must be filled out by the investor before the account is created. The investor would be required to provide all the necessary details along with copies of the required documents.
These documents include proof of address, identity, income, etc. First of all, Permanent Account Number (PAN) Card is mandatory to open this account. After the verification of all these documents, the investor must proceed to the next step.
3. In-person verification also takes place to cross-check the identity and validity of other documents that the investor has provided. Also, the investor would get a list of rules and regulations along with the details of the charges that the BO has to pay the DP.
4. Immediately after all the verification and approval of all the documentation, the demat account of the investor becomes operational.
Also Read: How to start investing in the stock market – A step-by-step guide
Frequently Asked Questions
Can a demat account be opened in the name of joint owners?
Yes. A demat account can be a single owner account or a joint owner account. A demat account can have a maximum of three account holders ie one principal holder and two joint holders.
Can any information submitted at the time of opening a demat account be modified at a later date?
Yes. In addition to the type of account, all other information, such as the name of the account holder, address, bank details, date of birth, etc.
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What is the difference between a broker and a depository participant?
A depository participant (DP) is an intermediary between the investor and the depository, such as CDSL or NSDL, while a broker is an intermediary between the investor and the stock exchange.
A depository participant (DP) acts as an intermediary between the investor and the depository, such as CDSL or NSDL. The depository is an organization that holds securities in electronic form, eliminating the need for physical share certificates.
A broker, on the other hand, acts as an intermediary between the investor and the stock market. They facilitate the buying and selling of securities on behalf of their clients.
Also Read: NSE is now India’s second largest commodity platform… with an asterisk
Can a demat account be opened directly with the deposit?
A demat account cannot be opened directly with deposits. The demat account should be opened only through a depository participant (DP).
Can securities of different companies be held in one demat account?
Yes. Securities of different companies can be held in the same demat account. This feature offers investors significant convenience and streamlines the management of their investment portfolio.
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Published: 04 Mar 2024, 19:06 IST