Points To Remember When Operating a Demat Account

Last Updated: 16 Oct 2024

In today’s digital world, everything has become simpler and easier. For instance, having a demat account has made things convenient for investors and traders in the stock market. However, there are certain points you need to keep in mind while operating a demat account.

What is a demat account?

A dematerialized account or demat account is an electronic form of holding your financial securities (debt or equity). The demat accounts are administered by two main depository organizations in India: Central Depository Services Limited and National Securities Depository Limited. Financial institutions like banks, also known as DP (Depository Participant), are the intermediary between the investor and the depository.

An online demat account is like having an electronic ownership statement bank where you can maintain all your equity holdings. This resolves the hassle of physical share certificates.

How To Open a Demat Account?

• Choose a DP where you would like to open your demat account.
• Fill the required forms to open a demat account with copies of the required documents. For the verification process, carry your original documents.
• Agree to the terms and conditions.
• An in-person verification will be conducted by a staff member of the DP to verify your details.
• Once the verification is completed, you will be provided with a client ID and an account number. Using these credentials, you can log in to your demat account.

Points To Keep In Mind While Operating A Demat Account:

An online demat account is about security and smart utilization.

• If you still possess the physical share, make a note of the distinct security numbers sent with the share certificate folio number. It is always good to keep the certificate’s photocopy with you. Make sure that every detail in the certificate matches the details in the demat account. Do not lose the acknowledgement of DRF (Demat Requisition Form) that was submitted to the DP until you receive the demat credit.
• Always remember to go through your transaction statements carefully. In case of any unauthorized credit or debit, inform your DP and the CDSL/NSDL.
• While selling your shares, you first need to fill the DIS (Debit Instruction Slip). Mention the required details accurately. While trading online, the broker might ask you for the power of attorney to make things simpler. It is completely legitimate, however, it is still up to you if you want to provide it. Otherwise, you can sign the DIS physically.
• Insist upon getting pre-printed DIS numbers and your ID (account number) pre-stamped on every DIS page. Ideally, do not share your DIS booklet with anyone.
• According to demat and SEBI regulations, you can pay any demat-related fees online or via cheque, no matter how small the charge is.
• Before issuing any DIS, always remember to check your balance. You are not allowed to sell more than the shares present in your demat account or sell the shares that are blocked due to any reason.
• Do not keep your demat account idle for too long. This will cause your account to freeze unless you send a written request for unfreezing it. If you’re not utilizing your demat account, freeze it. This ensures no unnecessary debits or credits in your account and keeps fraudulent transactions at bay.
• Although SEBI allows offline transfer of shares within your family or relinquishing of shares, do not do this unless it is genuinely required. Avoid such situations as this practice is unethical and a regulatory hassle.

Conclusion

Demat accounts online have made it easier to hold securities. The risk associated with fake certificates, thefts and delays are all eliminated. It also reduces a lot of paperwork and transaction costs.