Where to Open a Demat Account?

Share market investing in the bygone days involved a lot of paperwork. It was complicated and cumbersome until dematerialisation of shares made buying, selling, and holding shares effortless. Demat accounts that are used by investors have solved common trading-related problems such as signature mismatches, inadequate delivery systems, storing share certificates and losing share certificates, and wasted time.

Ever since Demat accounts came into use in 1997, they have evolutionized trading by providing secure ownership and fast transactions. Today, all transactions of shares are done only in the Demat mode through debits or credits to a Demat account. And the number of new Demat accounts has hit record highs this past year, testifying to the popularity of this investment vehicle.

Where to Open a Demat Account?

In order to start trading, you need to open an online Demat account and find a Depository Participant (DP) – which could be a brokerage or a financial institution. You can also open the account by registering online at any of the credible broking firms.

When you open a Demat account with the DP, the actual shares are held by one of the national depositories; National Securities Depository Ltd (NSDL) and the Central Depository Services India Ltd (CDSL). Besides, a Demat account can only hold shares to buy and sell shares. To invest, you need a trading account.

Discount brokers and full-service brokers are the two categories of brokerage firms. A discount broker typically acts as a functionary. It carries out trades as per an investor’s instructions and offers equity and derivatives as products. Service brokers, on the other hand, in addition to the services provided by discount brokers, offer research and advisory services to investors, and a broader range of investing options such as initial public offerings (IPOs), mutual funds, and insurance.

Benefits of a demat account

A good quality demat service account gives you 24×7 access to the market remotely. You can easily access your account through a desktop, laptop, tablet, or smartphone. It was difficult to achieve swift liquidity when involving physical shares and certificates. Demat accounts have solved the liquidity issues since buy or order are now executed within seconds.

These are some other benefits of a Demat account

  • It is fast and convenient to transact in securities with a demat account. It is even more convenient if you have a 2-in-1 demat and trading account as it allows you trade and invest seamlessly.
  • Receiving dividends, rights, bonuses, and stock splits, as well as investing in IPOs is fast and easy thanks to demat accounts.
  • When your securities are stored in electronic form, you don’t have to worry about theft, damage and frauds that were normally associated with physical certificates.

How to Choose Your Demat Partner

Investors must put in some research before choosing a Demat partner. One should prefer a full-service brokerage firm if you are a serious investor. Below are some basic questions need to be answered by the broking firm’s website:

  • How long has the broking firm been in business? Does it have a trustworthy track record?
  • What services do they provide? What kind of broking firm is best suited?
  • Are the services remotely accessible? Are the online services glitch-free?
  • How competitive are their fees? What kinds of discounts are offered to first-time investors?
  • Are the Demat account and bank account linked properly?
  • Is there a common depository facility?
  • Does the broking firm offer good analysis, market insight and real-time information and alerts?

Opening a Demat Account Online

Once you have answered these questions, opening a Demat account online with a leading broking firm is quite simple.

  • You have to fill and submit your broking firm’s account opening form along with KYC details: Date of Birth, PAN card, Email Address and Bank Account.
  • The DP’s KYC form will have a DP-Investor agreement. This spells out the rules and regulations, investor rights and obligations. You must read the fine print in detail.
  • Typically, the firm will send you an OTP on your registered mobile number. Details of your Demat account are sent to you on your registered mail address.
  • Many firms will require in-person-verification (IVP), this can be done by personally visiting a branch or having a DP representative visit your place.
  • You get a Demat number once your documents are verified

Conclusion:

Investing in shares is one way to secure your financial future provided you have the hang of the basics of investing. The first thing is to open a Demat account with a DP – bank or broking firm. Identifying the right DP, knowing where to open your Demat account – where to park your trust and your money is the key.

Open Demat Account at IIFL