The Demat Account tally in India has crossed the 100 million mark, up from just 40.9 million in March 2020. This surge indicates that savings patterns have evolved beyond the traditional fixed deposits.
An increasing number of young and new investors now understand the importance of participating in the stock markets. For this, opening a Demat Account is a pre-requisite.
So what are Demat accounts and how does a Demat account work?
This article will help you understand all the key details of a Demat account, and how to open a Demat account.
- What are Demat Accounts
- Who Introduced Demat Account
- How does Demat Account work
- Who are Depositories and Depository Participants
- How to open a Demat Account
- Checklist of Documents Required:
- Key Benefits of opening a Demat Account
What are Demat Accounts
Demat is the short form of Dematerialisation, that is the process of converting the physical share certificates into an electronic form.
A Demat account is a depository system that helps you store, monitor and track your shares and securities in an electronic format. Simply put, all the investments made by you – including shares, government securities, mutual funds and exchange traded funds – are held together in the Demat account. This eliminates the need for physical share certificates.
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How does Demat Account work
Before proceeding to how to open a Demat account, let us understand how does a Demat account work.
When you buy or sell any share or security, it is automatically debited or credited from your Demat account. That is, the transaction is captured immediately.
This increases the speed of transactions, reduces costs and makes the entire process of dealing in the securities markets smooth and hassle-free. It also provides higher security by reducing the risk of theft and tampering.
Who Introduced Demat Account
The Demat account system was introduced in the year 1996 for trades on the National Stock Exchange (NSE). In the same year, the National Securities Depository Limited (NSDL), promoted by the NSE, came into existence.
Meanwhile, the Central Depository Services (India) Limited (CDSL), promoted by BSE (formerly Bombay Stock Exchange), was launched in 1999.
Since then, the paperwork and physical share certificates have been replaced by an end-to-end digital process – with electronic entries of shares purchased, held and sold.
Who are Depositories and Depository Participants
When learning about what are Demat accounts, it is important to learn about the depositaries and depositary participants. NSDL and CDSL are the key depositories in India, which provide Demat account services to investors through intermediaries or Depository Participants.
Depository Participants are the SEBI-registered entities that act as intermediaries between the investors and the depository. Financial institutions, scheduled commercial banks, RBI-approved foreign banks operating in India, Non-Banking Financial Institutions, stockbrokers and share transfer agents are some examples of depository participants.
These SEBI-registered intermediaries enable you to open a Demat account for free, or may charge you a small fee to avail the depository service. The fee varies based on the terms agreed upon between the depository and the depository participant, the type of Demat account and several other factors.
How to open a Demat Account
Here is a simple step-by-step process that you can follow to open a Demat account:
- Choose a depository participant through whom you wish to open Demat account.
- Once you have made the choice, log on to their website or download their app on your phone. For instance, if you have chosen Prabhudas Lilladher as your depository participant, then you can enjoy the benefits of our InstaKYC feature and open Demat account within a few minutes. You can log on to https://instakyc.plindia.com/ or download the PL DigiTrade Mobile app.
- Remember to keep the following documents handy before starting the Demat account opening process: Aadhar card, PAN card and Cancelled cheque. You will also need a Webcam for personal identification and the mobile number linked to your Aadhar card.
- On the website/app, fill out the basic details, like name and phone number. Ensure that when you update your mobile number, it is active and currently in use.
- You will then receive an OTP, on that number. Enter the OTP and proceed
- Next, you will need to fill in your KYC details – such as date of birth, PAN, contact details and bank account details
That’s all you need to do to open Demat account!
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You can also open an Demat account with PL by simply visiting the nearest PL Branch.
Once your KYC is complete, an Email and SMS comprising details of your Demat account number will be sent to you. This is a 16-digit identification number and is unique to every investor. It represents your financial identity at the time of trading or making any investments in the stock markets.
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Checklist of Documents Required
- PAN Card
- Aadhar Card
- Identity Proof
- Residence Proof
- Bank Account Proof
- Proof of Income
Key Benefits of a Demat Account
Now that you know how to open a Demat account and how does a Demat account work, here’s a quick look at the advantages it offers.
- Saves Time & Cost: Opening Demat account helps you access and keep track of all your investments in one place. The end-to-end digital interface of your Demat account eliminates paper work and thus enables you to trade in an efficient and cost-effective manner.
- Higher Efficiency: Demat account enables faster settlement and delivery of trades. This means you can buy or sell more shares in lesser time and with higher efficiency.
- Automated Features: Demat account automates some tasks, which really makes it an efficient service. For instance, if a stock in your portfolio has announced dividends, bonus issue of shares, refunds, stock splits or interest – it will be automatically and swiftly updated in your Demat account.
- Transparency: A Demat account brings in a lot of transparency – in terms of number of shares held, bought and sold.
- Borderless Access: Once you open a Demat account, you can access it anywhere and anytime, literally. All you need is a mobile phone or laptop and an internet connection.
Opening a Demat account with a trusted and reputed brand like PL comes with a host of additional benefits.
- Brand Promise – With close to eight decades of experience
- One-Stop-Shop – Trade and invest in equity, commodity, currency, F&O, and mutual funds
- Swift account opening – Process done in just 7-8 minutes
- Best-in-class Research – Detailed insights to help you make informed decisions
- Superior Technology – Speed, security and 24×7 service through robust technical infrastructure
- Cross Platform Access – Through our web, android and iOS platforms
- DigiTrade App – Simplified trade and investment experience with one click login and actionable notifications
To open a Demat account with PL, click here