How to Use a Demat Account?
Back in the day, physical shares were the thing. Trading happened very differently than it does now. But with shares being dematerialized, it’s now easier and more convenient to buy and sell shares through a stock exchange. However, before you jump on the demat trading bandwagon, you need to open a demat account and a trading account with a stockbroker and depository participant.
The demat account lets you hold your shares in a dematerialized format, while the trading account makes it possible for you to buy and sell shares on the exchange. Clearly, to even convert your physical shares into the demat form, you need a demat account. Here’s where it becomes important to know more about how to open a demat account and how to use a demat account.
Today, with many market players offering deals that let you open a free demat account online, this process has become easier on the pocket. Nevertheless, let’s get to know the details of how to open a demat account.
How to open a Demat Account Online?
A demat account is just a few clicks away nowadays, because most DPs have made this facility available easily online. Here’s a quick walkthrough that will detail the steps involved in opening a demat account.
Step 1: Select a Depository Participant
The first step to opening a demat account is to select the DP you wish to open your demat account with. Many DPs now also allow you to open a free demat account online. So, check out if there are any such offers. Compare the fees and the features of the demat accounts offered by different DPs and choose the one that best fits your needs.
Step 2: Submit the necessary paperwork
Once you’ve chosen your DP, you need to fill in the demat account opening form offered by them and submit it. Along with this, you will also need to submit the copies of the required documents. These KYC documents include identity proofs like PAN card, Aadhaar card, and passport, address proofs like passport or Aadhaar card, and a passport-size photograph.
Step 3: Get the In-Person Verification done
After you’ve submitted your application, an In-Person Verification (IPV) will be carried out by the DP, where they send an official over to verify the validity of your details in person. This is a necessary step in the process of opening a demat account.
Step 4: Receive the details of your demat account
Once the IPV is complete and your application has been approved, the DP will give you the details of your demat account. This includes specifics like your demat account number, your client ID, and a temporary password or a link to set your own password. You can use these details to log into your account.
How to use a Demat Account?
Once you’ve received the details of your account, you need to learn how to use a demat account. Here are some key points that will help you in this regard.
Activating and using your Demat account
You can use your client ID and your password to activate and access your demat account. You can then use your demat account to hold the stocks and financial instruments in your portfolio.
Linking your Demat account with a Trading Account
To actively buy and sell stocks in the stock market, you will need a trading account as well. Your demat account needs to be linked to your trading account, which in turn is linked to your bank account.
Transfer of shares to your Demat Account
Once your trade is executed and confirmed by the stock exchange, it takes T+2 days for the trade to reflect in your demat account. T+2 indicates 2 days from the trading day, which is denoted by the letter T.
Executing a Power of Attorney for your Demat Account
Account holders can give a power of attorney (POA) to a broker to operate the account on the client’s behalf. With the POA, the broker receives the authority to issue debit/credit instructions linked to your demat account. Before you execute a POA in favor of a broker, ensure that you’ve read the clauses in the demat agreement carefully.
A demat account is mandatory if you wish to trade in the stock market. So, ensure that you know all about how to open a demat account and how to use a demat account before you begin trading. That way, you can confidently take trading decisions and keep an eye on your account without any trouble.