Understanding the Procedure of Demat Account KYC
- 5 min read
Due to the Indian stock market’s shift from a physical to a digital system, demat accounts have become mandatory. Know Your Customer (KYC) is an essential regulatory step to confirm the identity and address of those who want to register a demat account. This blog analyses the importance of Demat account KYC and its procedure.
Understanding KYC for a Demat account
When an investor wants to open a Demat account and start trading securities, KYC assists brokers and regulatory bodies to verify the identity of the investor. All investor data is collected and saved in a single database using this one-time procedure.
Additionally, KYC restricts the scope of illicit activity in investments. By entering the investor’s Permanent Account Number (PAN), the authorities can access their financial information. The Demat account KYC process simplifies tax filing for investors by linking all their transactions to their bank account, making it easier to submit tax returns.
Importance of KYC for Opening a Demat Account
KYC is a mandatory norm set by the Indian government when opening financial and investment accounts. Demat account KYC is important for verifying the identification of the account holder and protecting organisations against financial fraud. It also follows the guidelines set out by financial regulators like the Securities and Exchange Board of India (SEBI) to maintain a legal and secure financial environment.
Just like opening a bank account requires identity verification, opening a Demat account in India also requires the KYC verification process. It is an important norm to hold the purchased securities.
E-KYC Procedure for a Demat Account
The e-KYC process involves the submission and verification of different documents. These include a valid mobile number and email ID, proof of identity, proof of address, and bank details. For Demat account KYC update online, check the following process:
1. KYC Form Fillup
First of all, you need to fill up the KYC form which will ask for some basic personal information. This form requests you to fill out your full name, address, phone number, date of birth and more. To create your own profile in the system, you must fill out this form.
2. PAN Card Submission
You also need to submit your PAN card. You must provide government-approved identification documentation like a driving license, a passport, or an Aadhaar card.
3. Submission of Residential Address
Next, you have to submit proof of your residential address. You may submit a bank statement, rent agreement, voter ID, Aadhaar card, utility bills for water or electricity, and a driving license.
4. Submission of Bank Details
You should also submit a cancelled cheque or the front page of your passbook to verify your bank details. The front page of the passbook must contain relevant details of your bank account.
5. Online Verification Process
For Aadhaar-based Demat accounts, e-KYC streamlines and expedites the KYC procedure in a very short time. You can use an OTP to confirm if your current mobile number is linked to your Aadhaar. However, the annual maximum investment in mutual funds for Aadhaar-based verifications is INR 50,000.
Therefore, you will need to go through in-person verification, which entails taking a photo or a live video of yourself. These are useful for transactions of a larger volume and quantity of shares.
Final Thoughts
The Demat account KYC procedure restricts fraudulent financial activity and makes your transactions safer. You must provide your KYC documents, such as proof of identification, proof of address, PAN information, and bank account information, for the verification process.
Want to start your investment journey by investing in securities like stocks, bonds, and mutual funds? Download the application of PL Capital Group – Prabhudas Lilladher and open a Demat account for free! Opening your Demat account with PL includes an instant e-KYC process via Aadhaar and PAN.
Frequently Asked Questions
1. How to complete KYC in a Demat account?
The Demat account KYC verification is very simple. You need to fill out the KYC form and submit proof of residential address, PAN card, and bank details. Your DP will complete the online verification process of these documents.
2. Is KYC important for opening a Demat account?
Yes, KYC is required to open a Demat account since SEBI has made it mandatory to ensure a secure financial ecosystem.
3. What happens if the Demat account’s KYC is not updated?
If you do not update your KYC in your Demat account, your account becomes inactive, and no transactions will be permitted.
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Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.
