As the Demat account brings many benefits, its acceptance is increasing day by day. It provides a digital mode of holding the shares and securities of the investors. In this world where people prefer the online route for most of their tasks, the Demat account has met their expectations to the fullest. Those who may have ventured into the world of investing may not be fully aware of all of the facts and features of the Demat account. Let us thus start with the basics.
Depositories: The depositories are the organizations that hold the investors’ Demat accounts. They are responsible for their maintenance. In India, there are two such organisations. The National Securities Depository Ltd (NSDL) and the Central Depository Services Ltd ( CSDL).
Depository participants: these are the financial institutions that provide the facility to open a free Demat account. They are registered with the NSDL and CDSL and have authorization from the Securities And Exchange Board Of India (SEBI). They act as the intermediary between you and the depositories.
Steps to Open a free Demat Account
Now that we know how the Demat account works and who the participants are involved in providing the services, let’s explore the path to open a free demat account. You can follow the following steps to open a free Demat account.
1. The first step requires one to apply for the Demat account with any of the depository participants providing the facility to open a free demat account. Many institutions are facilitating the opening of Demat accounts. You can visit their office or contact them through their online portal. Well-known institutions like Kotak Securities have a robust mechanism to accept your request in both online and offline modes. Their online platform is among the best-rated ones acting as a one-stop destination for all your financial needs. When you are ready and select a DP, get the account opening form and fill it out.
2. After filling out the form, one must submit the complete details to know your customer (KYC) process. To get a free Demat account online, submit all the details on the web or app portal of the institution. Provide personal details like your name, date of birth, address, etc. Also, provide the mobile number you want to link with the Demat account.
3. The next step is to submit the documents indicating the proof of the details you submitted earlier. The address proof, proof of identity, and the pan card are mandatory. For this, you can provide your Aadhaar card, voter id, or any such government-approved documents that your DP may approve of.
4. Following submitting the above documents, you must furnish your bank details and the pan card number. The Demat account requires linking the bank account with it.
5. Once you are through with these steps, the DP will verify all the documents and the details provided. This step is necessary to maintain transparency.
6. When the DP completes the verification process, you will be eligible to get your 16 digits unique number of the Demat account(BOID). Receiving the BOID number marks the successful completion of the entire process. You will also receive the login credentials via mail or registered mobile number.
Documents Required to Open a Demat Account
The documents required while opening the free Demat account are-
Although the documentation involved is minimal, one should have the requisite information regarding them for a hassle-free completion of the process.
- For proof of identity – Voter ID, Adhaar card, ID proof from an educational institution, office, organisation, your work, or driving licence
- For proof of address – Adhaar card, driving licence, passport, registered lease agreement, landline bill, electricity bill, insurance copy, ration card, gas bill, bank passbook, bank account statement less than three months old, voter ID
- Pan card
- Bank account – a copy of the passbook or bank statement
- Income proof – a copy of the recent salary slips, income tax returns
Charges Involved in a Demat Account
The Demat account carries fees that the investors need to pay. At first, there may be opening account charges. Some DPS charge it while many others don’t. Then there will be an annual maintenance fee payable on an annual basis. Apart from these, a DP could charge you for –
- Dematerialization or rematerialization of physical certificates
- Postal charges
- conversion and reconversion of mutual fund units, etc.
You can use a brokerage calculator to find out how much you would have to pay aa charges and also how much returns you can have.
Some tips for choosing for you while you open a free Demat account for the first time:
1. There are two kinds of DPs; discount brokers and full-time brokers. Choose between the two as per needs only. Discount brokers don’t provide investing tips, while full-time brokers do. Also, go with a reputed financial institution that provides excellent services and trusts many investors.
2. Check the fees that the DP levies. It is crucial as the charges can eat up a part of your profits.
3. Customer support and trading technologies used in the trading platforms are vital. Take a close look and find the relevant information before opening the account.
4. Finally, look for the DP and its trading platform features. Real-time updates regarding stocks, customized watchlists, performance analysis, are the top ones to look for.
Choose the Demat account that serves you the best, keeping these factors in mind. Always prioritise your needs while making your choice.