A few questions people ask about Demat Accounts

A Demat account, short for Dematerialisation Account, is necessary to invest in and hold stocks and shares. There were a total of 16.8 million Demat accounts in India in 2009 which increased to 30.8 million in 2017 and, subsequently, to 34.8 million in 2018. This rise of Demat accounts in India can be attributed to an increasing amount of awareness among the masses.

Even though people are aware of a demat account in India, they usually have a lot of questions about how it works. Here, we’ll clear up any demat account information you might need.

What is a Demat Account?

A demat account is like a bank account for your shares and stocks in which the shares/stocks are held in an electronic format. Demat accounts make it much easier to own and trade stocks, shares, mutual funds, ETFs by eliminating paperwork. Note that a Demat account and trading account are not the same. A trading account is used to buy and sell shares while a Demat account is used to hold them. Similar to a bank account, where money is debited and credited, shares are debited and credited from a Demat account.

What are the Facilities You Can Avail by Opening a Demat Account?

  • Share Transfer: Demat accounts are used to transfer the share holdings of an investor.
  • Loan Facility: If you hold securities in your demat account, you have access to loan facilities. Securities function as collateral.
  • Dematerialisation and Rematerialisation: With an active demat account, conversion of securities into different forms is an easy task. You can convert physical shares into electronic ones or vice versa.
  • Availing Corporate Benefits: With demat accounts, you can avail of the benefits associated with holding securities. For example, when a company provides dividends, interests or refunds to its investors, demat account holders can access these benefits immediately.

How to Open a Demat Account?

  • Choose a Depository Participant (DP)* with whom you would like to open Demat account.
  • Fill the account opening form. Carry all your original documents with you.
  • The DP will provide you a copy of all the terms and conditions and the charges that will be levied for the services.
  • After the form is processed, you will be given an account number/client ID and a password by the DP. These details would be required to access the demat account online.
  • You can operate your demat account without holding any securities. Also, there is no hassle of maintaining a minimum balance either.

*A Depository Participant (DP) is a link between the account holder and a depository such as the CDSL (Central Depository Services Limited) or the NSDL (National Securities Depository Limited). A DP can be a bank, a financial institution, brokerage house or similar entity. To be eligible, it must be registered with SEBI.

What are the Documents Needed in Order to Open a Demat Account?

Here are the documents required for opening a Demat Account:

  • Proof of Income: Photocopy of Income Tax Return (ITR) Acknowledgment slip, salary slip, certificate of net worth are accepted as proof of income.
  • Proof of Identity: PAN card, Aadhar, Voter ID, Driving License, Passport are all accepted. Identity cards issued by the Central/State Governments, statutory bodies, public sector undertakings, etc. are also accepted.
  • Proof of Address: Passport, Voter Identity Card, Registered Lease or Sale of Agreement of Residence, Driving License, Bank Statement not older than 3 months, etc. The address provided in the name of the spouse is accepted as well.

What are the other Demat Account Details?

There are some details you should keep an eye on, and make sure to collect these from your DP:

  • Demat Account Number: This is known as “Beneficiary ID” if under CDSL (Central Depository Services Ltd). It is a 16 digit number.
  • DP ID: This ID is given to the depository participant; it forms a part of the demat account number. Please note: DP ID and Client ID are not the same. Your Demat account number is a combination of your DP ID and your Client ID.
  • POA Number: This refers to the Power of Attorney agreement, in which an investor permits a stockbroker to operate the account.


These are the basics you need to know about Demat accounts. Armed with the basics, it will be easy for you to open your Demat account with a trusted financial partner and begin trading in shares and securities.