‘Demat account’ is a frequently used term in the world of trading and investments. The popularity of these accounts has scaled new heights with close to 4 million Demat accounts opened in 2018 singularly, a 13% increase from the previous year.
The dramatic shift in the savings pattern of Indians from traditional instruments to available alternatives such as stocks is primarily responsible for the jump.
Increasing demand for these accounts has also led to depository participants offering the best features at minimum costs, thus benefiting investors. Plus, SEBI has mandated holding a Demat account for stock market trading.
Take a look at three crucial terms in this context for a better understanding of Demat account in India.
It is a process that facilitates the conversion of share certificates from physical to the electronic form. Shares held thereafter are easier to manage while providing more accessibility from anywhere around the globe
Dematerialisation also allows you to monitor and track your holdings seamlessly, on-the-go.
A depository participant acts as an intermediary or agent of a central depository and provides namesake services to investors and traders. India currently has two central depositories registered with the apex trading and investment regulatory body SEBI.
A depository participant must, therefore, be registered with either of these two licensed operators to open a Demat account.
Each Demat account is assigned with a unique 16-digit client ID that acts as the investor’s identity. The first 8 digits of the ID represent the depository participant while the last 8 digits act as a unique identification for the investor, facilitating sale or purchase of shares and securities.
Opening a Demat account is quite a straightforward process. If you’re interested in opening one, this step-by-step guide can help put things in perspective.
Choosing a depository participant (DP) is the first step to open a Demat account. In India, banks, stockbrokers, and online investment platforms offer DP services. While choosing a DP, it is advisable to go for a service provider whose services and features match your needs and requirements.
Visit your DP’s website and fill out the online Demat account opening form for opening a Demat account. Many depository participants like IIFL offer the ability to open both trading and Demat accounts.
Once you have duly filled the Demat account opening form, you will be asked to fulfil the Know Your Customer (KYC) norms. This would require you to submit scanned copies of KYC documents such as your identity proof, address proof, bank account statement, and income proof. It is a good idea to have all of the relevant documents by your side before applying, since this can help you get through the process faster.
After submitting your Demat account opening form along with the requisite proofs, you will be asked by your DP to go through a process called ‘In Person Verification’ (IPV). This exercise is mandatory, and it’s carried out with the intention of verifying the authenticity of your documents. Depending on your DP, you may be asked to be present in person at any one of your service provider’s offices. However, many depository participants now offer IPV services online through the use of a webcam or a smartphone.
Upon completion of IPV, you will be asked to sign an agreement with your DP. This agreement generally contains all the duties and rights of the depository participant and the investor.
Once this is done, your DP shall proceed to process your Demat account opening form. Upon approval of your application, you will be provided with a unique Beneficial Owner Identification Number (BO ID). This BO ID is used to access your Demat account.
The documentation involved in opening a Demat account is minimal. This makes it easier for new applicants to see the process through from start to finish without any hassles. You are only required to submit the following documents.
The Demat account charges levied by India Infoline are highly competitive and transparent, and they cause no significant financial burden to investors and traders. The entire schedule of fees and charges for opening a Demat account are tabulated below.
|Particulars of service||Charges Including GST (in Rs.)|
|Account opening fee||Rs. 295|
|Annual Maintenance Charges (AMC)||Rs. 0 (for the 1st Year)|
|Dematerialization of share certificates||Rs. 17.7 (per certificate)|
|Rematerialization of share certificates||Rs. 17.7|
|Conversion of Mutual Fund units||Rs. 0|
|Reconversion of Mutual Fund units into Statement of Account||Rs. 0|
|Postal charges||Rs. 47.2 (per request)|
In the current scenario, if you’re interested in investing in the share market, you cannot do so without a Demat account. That’s how important a Demat account is to share trading. Some of the other reasons that make a Demat account so important are briefly explained below.
With a Demat account, you don’t have to worry about dealing with forged or fake share certificates. Each record of shares that you have in your account is genuine.
Proper storage and maintenance of physical share certificates can be tiresome. Also, there’s the risk of having your certificates lost or damaged. A Demat account solves all of these issues.
Since all the records associated with a Demat account are online and electronic, you can access them from anywhere and at any point in time.
A Demat account does away with additional costs such as handling charges and stamp duties, which were levied on physical share certificates. This translates to lower costs and significant savings.
A Demat account doesn’t merely support the equity share market. It can also be used to hold other electronic financial instruments such as bonds, mutual funds, and debt securities, among others. This enables you to track and monitor all of your investments under a single roof.
Before you go ahead and open a Demat account with a depository participant, you need to keep in mind certain essential pointers. Here are some things to remember before opening a Demat account.
A trading account is necessary for buying and selling shares in the stock market. Without it, there isn’t much use for a Demat account, except to hold your financial assets. Therefore, it is a wise idea to link both these accounts when you’re opening a Demat account. Alternatively, you could also opt for a depository participant like India Infoline, who offers both Trading and Demat accounts under one roof.
Before submitting your Demat account opening form, always read through the statement of fees and charges. You could also compare them with other depository participants to ensure that you’re getting a good deal. Being aware of the charges upfront ensures that you are not caught unawares once you’ve begun trading.
Remember to double check the details in your Demat account opening form before submitting it. This way, you can make sure that there aren’t any mistakes or fields left unfilled. Errors like these could lead to your application getting rejected. To ensure that your details are all correct, you could also enlist the help of a third person to verify your form before submitting it.
Most people tend to miss this step while opening a Demat account. It’s not a good idea to put off filing a nominee, because you might tend to forget to do it in the future altogether. Having a nominee for your Demat account is critical, since it makes the process of transmission of shares much easier in the future.
When it comes to choosing the right Demat account for you, your needs and requirements play a significant role in influencing your choice. Here are some points that you should consider when you’re opening a Demat account.
Primarily, there are two different types of depository participants - discount stockbrokers and full-service stockbrokers. A discount stockbroker generally does not provide any other services apart from share trading and trading in the derivatives segment. On the other hand, a full-service stockbroker like India Infoline offers plenty of additional services such as mutual fund investments and investment in IPOs. The depository participant that you choose can shape your stock market experience significantly.
The fees and charges that DPs charge vary widely from one to another. Therefore, it’s always a good idea to thoroughly read through the fees and charges section before signing up with a depository participant for opening a Demat account. This will prevent you from getting caught unawares with hidden charges or fees at a later point in time.
Customer support is another important metric that you can use to choose the best Demat account. Your depository participant should possess a robust customer support mechanism to help resolve queries and issues. When things go out of control, you should be able to bank on your DP to help bring things back on track as soon as possible.
Before signing up with a depository participant, you also need to evaluate the trading technology used by them. In order to conduct your trades in a smooth and seamless manner, it is essential to have a user interface that is clean, clutter-free, easy to understand, and user-friendly.
Not all depository participants offer the same set of features. Therefore, take a look at the features and benefits offered by various DPs before choosing the right one for your trading requirements. Some of the must-have features for quick and effective trading include:
ISIN (International Securities Identification Number) is a unique 12-digit alpha-numeric identification code that is used to identify specific securities. (E.g. INE214T01019).
One could find the details related to the ISIN number of securities on the website of National Securities Depository Ltd and Central Depository Services (India) Ltd.
Consolidation: If you want to consolidate various folios of a particular company into a single folio, you can forward the physical certificates along with the letter signed by you to the RSTA of the company.
Account freezing: You have the option of freezing your account, any specific security, or even a particular number of securities for any given period of time.
Account types: Just like a bank account, you can open a demat account in single/joint names/multiple accounts. But in case of a minor account, a guardian should be appointed for operating the account.
To truly make the most of your access to the stock market, you require a depository participant that offers state-of-the-art features and dependable support. India Infoline excels in these areas, which is why you’ll be glad to choose us. By opening a Demat account with IIFL, you stand to gain in more ways than one. Here’s a glimpse at how an IIFL Demat account can benefit you.
And that’s not all. In addition to the advantages that are specific to the IIFL Demat account, you also get to enjoy a variety of other benefits when you opt for India Infoline’s trading solutions. Here are more reasons why IIFL is the best choice for you.
India infoline offers one brokerage plan which has the best offering. This plan allows you to enjoy a fixed brokerage rate depending on the segment you're trading in. The Brokerage charges are Free for Delivery trades and Rs.20/Order for Options. For Intraday and Futures the charges are Rs.20/Order or 0.05% whichever is lower. There are no Minimum Margins or Monthly Subscription fees. The Annual Maintenance charge for the first year is also zero.
A demat account can be closed as easily as it is opened. To close a demat account, you will have to submit a request form signed by all the holders (in case of multiple holders). You will have to transfer all the holdings of the demat account before closure. The DP will not process the closure application if any Dematerialisation requests are pending.
Conclusion: Opening a DEMAT account is a simple, speedy and smooth process. By keeping in mind the set of aforementioned factors and details, you, too, can open a DEMAT account at IIFL in a completely hassle-free manner.
Submit the following documents to kick start your Demat account opening process.
You can open a Demat account with India Infoline at minimal charges of Rs.295. Also, you get to enjoy zero demat Annual Maintenance Charges (AMC) for 1 year.
With India Infoline, you can avail the following benefits –
It is advisable to add a nominee in Demat account as it makes the process of transmission of shares much convenient in the future.