If you’re interested in finance and wish to invest in the stock market, you must’ve heard the term ‘Demat account’ at some point in time. You may not know what it means or how it truly works. To help you understand the basics of a DEMAT account and its workings, we have put together all that you would need to know right here.
What is a DEMAT account?
A Demat Account, also known as a Dematerialized Account, allows you to hold shares and assets electronically. Shares are typically purchased and stored in a Demat Account, while online trading makes it easier for customers to trade. An individual’s interests in shares, government securities, exchange-traded funds, bonds, and mutual funds are held in a Demat Account.
The first and most important step when trading stocks is to open a DEMAT account. To get into a bit of the history of stocks, here is what happened. After the Depositories Act of 1996, the Securities and Exchange Board of India (SEBI) made it essential for every dealer and investor to maintain a DEMAT account that held securities in a dematerialized form.
One of the primary benefits of a Demat account is to have access to the securities market so that you can trade. A Demat account is mainly backed by either the NSDL or CDSL, both regulated by SEBI. They allow you to deposit the stocks that you acquire in an account that is unique to you.
DEMAT accounts are available from practically all nationalised banks and brokers. Because different DEMAT accounts are necessary for each exchange, the first step is to choose which exchange you want to trade on. The National Stock Exchange, commonly known as the (NSE) and the Bombay Stock Exchange (BSE), are India’s two most important stock exchanges for investors to pick.
Now that you know what a DEMAT account is and how it came into the picture, all that’s left to learn is how to set up a DEMAT account yourself. Ensure that you save this blog post as we are about to show you 5 simple steps to open a DEMAT account from the comfort of your home.
Step 1: Select a Depository Participant of your choice
A Depository Participant or a ‘DP’ is an agent or licensed stockbroker. A person is free to open and maintain a Demat account using a DP as they serve as the central intermediary between the depository and the investors.
To open a Demat account, you must first complete this step. DP services are available in India through banks, stockbrokers, and internet investment platforms. When selecting a DP, make sure to look for a service provider whose services and features match your demands and expectations.
Step 2: Fill and Submit your DEMAT account opening Form.
The next step is to go to your DP’s website and complete the online Demat account opening form. Many depository participants allow you to open both trading and depository accounts.
Step 3: Follow the KYC (Know Your Customer) guidelines.
After you’ve completed the Demat account application, you’ll be requested to meet the Know Your Customer (KYC) guidelines. This check will necessitate submitting scanned copies of KYC documents such as proof of identification, address, bank account statement, and proof of income. It’s a good idea to have all of the necessary paperwork on hand before applying since this will help you get through the process more quickly.
Step 4: Verification and Signing
Your DP will invite you to go through a verification process when you submit your Demat account opening with the required evidence. This step is a required exercise that you must do to verify the legitimacy of your files and documents.
Depending on your DP, you may be mostly asked to appear in person at any of your service provider’s offices. On the other hand, many depository participants now provide verification services online using a camera or a smartphone.
After you’ve completed verification, you’ll be asked to sign a contract with your DP. This agreement enumerates all of the depository participant’s and investor’s responsibilities and rights.
Step 5: Obtain your BO Identification Number
Once this is completed, your DP will begin processing your Demat account application. You will be given a unique Beneficial Owner Identification Number once your application has been approved (BO ID). Know that your Demat account can be accessed using this BO ID.
When your BO ID is generated, your Demat account is ready, and you are free to dive into the world of stocks and investments.