What is Demat account and why it is required?
Securities and Exchange Board of India (SEBI) is a board of India appointed by the Government
of India in 1992 with its head office at Mumbai.
Its one of the function is helping the business in stock exchanges and in other security markets.
In another word it is the regulator for stock exchanges. It monitors and regulates both stock
exchanges in India.
a) Demat (short form of Dematerialization) is the process by which an investor can get shares
(also called as physical certificates) converted into
electronic form maintained in an account with the Depository Participant (DP).
b) DP could be organizations involved in the business of providing financial services like banks,
brokers, financial institutions etc. DP’s are like
agents of Depository.
c) Depository is an organization responsible to maintain investor's securities (securities can be
shares or any other form of investments) in the
electronic form.
In India there are two such organizations called NSDL (National Securities Depository Ltd.)
and CDSL (Central Depository Services India Ltd.)
d) Investor’s wishing to open Demat account has to go DP and open the account.
e) Opening the Demat account is as simple as opening the saving bank account with any bank.
As you need bank account to save money, deposit cheques etc, likewise you need to have a
demat account to buy and sell stocks in share
market and to hold the shares.
f) All shares what you own will show in your demat account, so you don't have to possess any
physical certificates. All your shares are all held
electronically in your demat account.
As you buy and sell the shares, accordingly, your shares will get adjusted in your demat
account.
Demat account is must
YES. Demat account is must.
The market regulator, the Securities and Exchange Board of India (SEBI), has made it
compulsory to open the demat account if you want to buy and sell shares in Indian share
market.
So a demat account is a must for trading and investing in share market.
How to open a Demat account?
You have to approach a Depository Participant (DP) to open a Demat account.
Most banks are DP participants so you can approach them or else you can contact us.
To have latest list of registered DP please visit websites www.nsdl.co.in and
www.cdslindia.com.
A broker and a DP are two different people.
A broker is a member of the stock exchange, who buys and sells shares on his behalf and also
on behalf of his customers.
A broker can also be a DP.
Following are the documents required to open Demat account
When you approach any DP, you will be guided through the formalities for opening a demat
account.
The DP will ask to provide some documents as proof of your identity and address.
Below is a list of documents out of which you have to submit one or two.
PAN card, Voter’s ID, Passport, Ration card, Driver’s license,
Photo credit card Employee ID card, IT returns, Electricity/ Landline phone bill etc.
Do you need any shares to open a Demat account?
NO. You need not have to have any shares to open a demat account.
A demat account can be opened with no balance of shares.
And also there is no restriction to maintain any minimum shares. You can have a zero balance
(shares) in your account.
How much it cost to open a Demat account?
The charges for demat account opening varies from broker to broker of from DP to DP.
Generally some broker charge one time account opening fees but currently due to high
competition they are offering free account.
To have latest charges please visit websites of www.nsdl.co.in and www.cdslindia.com or else
you need to contact the specific broker.
Finally
after successfully opening the demat account you are ready to do buying and selling of shares
in share market exchanges like BSE and NSE.
Important points to remember while opening online demat account
¨ Do multiple enquiries with various brokers or DP’s and try getting low brokerage charges.
¨ Also discuss about the margin they provide for day trading.
¨ Discuss about fund transfer facility. The fund transfer should be reliable and easy. Fund
transfer from your bank account to trading account and fund payout from your trading account
back to your bank savings account.
Some online share trading account has integrated savings account which makes easy for you to
transfer funds from your saving account to trading account.
¨ Very important is about service they provide, the research calls, intraday or daily trading tips.
¨ Also enquire about their services charges and any other hidden fees if any.
¨ Check how reliable and easy is to contact them in case of any emergency, like buying and
selling of shares on immediate basis or in case of any technical or other problems at your side
while trading yourself.
¨ You can also request to broker for demonstration of the trading terminal software and check
how comfortable it is for you.
There are various brokers and DP and few are listed below
www.5paisa.com
www.icicdirect.com
www.sharekhan.com
www.motilaloswal.com
www.reliancemoney.com
www.religaresecurities.com
www.hdfcsec.com
www.geojit.com |
