We have written many articles providing details about dematerialisation of securities, advantages of holding shares in demat or electronic form and how to manage your investment in demat mode.
The below write-up will elaborate more on how to open a demat account, importance of nomination, how to convert your physical shares into demat and other facilities offered by a demat account.
Opening a demat accountTo open a demat account; you have to approach a depository participant (DP), an agent of depository, and fill up an account opening form. The list of DPs is available in the websites of depositories: CDSL (Central Depository Services (India) Ltd and NSDL (National Securities Depository Ltd).
Along with the account opening form, you must enclose photocopies of some documents for proof of identity and proof of address.
You will have to sign an agreement with DP in the depository prescribed standard format, which gives details of rights and duties of investor and DP. You are entitled to receive a copy of the agreement and schedule of charges for future reference.
The DP will then open an account and give you the demat account number. This is also called beneficial owner identification number (BO ID). All your purchases / investments in securities will be credited to this account. If you sell your securities, your demat account will be debited.
You can have multiple demat accounts if you so wish. You can choose your DP as per your convenience and there is no compulsion to open DP account with your stock broker.
- Investors are required to pay the charges towards:
- Dematerialisation and rematerialisation of your securities
- Annual account maintenance
- Transactions fees (only for sell transactions)
- The charges of DPs are available in comparable structure on the websites of the depositories.
- The DP may revise the charges by giving 30 days notice in advance.
- If demat account is closed in between of the year, annual maintenance charges shall be levied proportionately for each quarter.
- There is no minimum number of shares that have to be kept in the demat account.
- No charge is applicable for closure of DP account.
- No charge for transfer of holdings from one DP to another DP, if investor is not satisfied with the services of your existing DP.
- Nomination smoothens the process of transmission of your securities to your heirs, upon demise. For physical shares, you have to avail nomination separately for each company in which you hold shares / debentures. Whereas, by availing nomination for your demat account, all your investments in that account is covered under that nomination.
How to demat your shares?
- To demat your physical certificates, you should approach the DP and submit the following documents:
- Dematerialization Request Form (DRF)
- Physical certificates by marking “Surrendered for Dematerialization”
- Separate DRF has to be filled for each ISIN.
- Surrender your physical certificates to your DP for dematerialisation.
- The DP intimates your request to the depository through the system.
- The DP submits the certificates to the registrar and share transfer agent (RSTA) of the company.
- In case of any objection or in case of additional documents (if any), the RSTA informs you directly. RSTA confirms the dematerialisation request from depository.
- After dematerialising the certificates, RSTA updates the accounts and informs depository regarding completion of dematerialisation.
- Depository updates its accounts and informs the DP.
- The DP then updates your demat account by crediting the shares.
- Before approaching your DP for demating your shares, you can check the list of shares and debentures that can be dematerialised from the websites of CDSL and NSDL.
- To convert physical certificates into demat mode, the name in the share certificate should match with the name of the demat account holder.
In case of joint holding, the name should be in the same order both in the physical certificate as well as in the demat account. However, you can request to change the order of the names of the joint holders in the share certificate by submitting a Transposition cum Demat Form.
Example: You may have a demat account in the sequence of, ‘A’ & ‘B’, whereas the share certificate may be in the sequence of ‘B’ & ‘A’. In this case, you can lodge the security certificates for dematerialisation in the same account by filling Transposition cum Demat Form to effect change in the order of names and to dematerialise the securities as well.
Depository websites have a list of shares in demat form. Investor cannot demat the shares of vanishing companies or shares of the companies which are not in list of depositories.
ISIN (International Securities Identification Number) is a unique 12 digit alpha-numeric identification number allotted to each security. (E.g. INE214T01019). Fully paid-up equity shares, partly paid-up shares, equity with differential voting / dividend rights issued by the same issuer will have different ISINs.
The details of ISIN number of securities are available in the website of National Securities Depository Ltd and Central Depository Services (India) Ltd.
- You have the option to authorise any person to operate your DP account by executing a power of attorney (PoA) and submitting it to the DP. PoA enables the authorised person to operate the account on your behalf.
- You have the option to grant PoA in favour of your broker and / or DP to operate your account, i.e. to buy or sell shares on your behalf, debit or credit your bank account and DP account. However, you are required to carefully read and understand all the clauses of the PoA before signing it.
- PoA is an optional facility and executing it is not mandatory. No stock broker or DP can deny services to you if you refuse to execute it. You can revoke PoA at any time.
Other features of demat accountIf you hold various folios of a particular company and want to consolidate them into single folio, you can forward the physical certificates along with the letter signed by you to the RSTA of the company.
You can freeze your account, specific security or specific number of securities for any given period of time.
Similar to the bank account, you can open demat account in single / joint names / multiple accounts. If you are opening an account for the minor, guardian should be appointed for operating the account.
However, you cannot open demat account in “either or survivor” basis. You cannot change name or add or delete the account holder’s names. In such instances, you have to open new demat account with the desired names.