Best Demat Account for Beginners in India

If you are new to investing in the stock markets, you may not know much about Demat accounts. Well, a Demat account is like a bank account for shares and other securities. Like a bank account, it credits shares to your account when you buy, and debits them when you sell. Since shares are no longer held in physical form, you will need a Demat account to hold your shares. A Demat account is used to hold your securities in a Dematerialized or electronic form. You also need a Demat account to hold certain securities like bonds and debentures.

Additional Read: Is a Demat Account Safe?

Where to Open a Demat Account for Beginners?

The responsibility to open and manage your Demat account lies with Central Depositories. There are two Central depositories in India, namely, NSDL (National Securities Depository Ltd) and CDSL (Central Depository Services Ltd). These Central Depositories appoint Depository Participants who serve as your ultimate touchpoints for opening your Demat account.

What is a Depository Participant?

A depository participant or a DP, is an intermediary of a central depository that records all your transactions. A DP can be stockbrokers, banks, and other non-bank finance companies. Typically, DPs are of two types – Full-service brokers and Discount Brokers. Full-service brokers offer 360-degree broking services. Their additional value-based services include financial consultancy, investment advisory services, in-depth market research, etc. And, Discount brokers, as the name suggests, offer no-frill broking services at a relatively discounted or lower price. Their services are restricted to only transacting your trades. They do not provide any investment advisory services, etc. 

You can opt for a Discount Broker if you are financially well-read and researched and can make accurate trading and investment decisions. But, if you are a beginner in financial markets without much knowledge of stocks and other securities, opting for full-service brokers could be a good idea. It may appear heavier on your pocket at the beginning, but, if it results in capturing profitable market opportunities along with the maintenance of a healthy risk-return ratio, it is a price worth paying.

Additional Read: Who can open a Demat Account? Know the Eligibility Criteria

What is best for me?

If you are a beginner, you have two choices – opening a Demat account with a stockbroker or a bank. It would be more convenient to open a three-in-one account with a bank or broker, which combines a bank account, trading account, and a Demat account. This makes for a seamless process. When you buy securities, the amount to pay for them is debited from your bank account, and the shares are credited to your Demat account.

Additional Read: How to Choose Best 3-in-1 Demat & Trading Accounts in India

You can also get a Demat account through your stockbroking firm. For example, if you feel that a certain brokerage firm suits your needs, you can open a Demat and trading account with it. You will have to deposit a certain amount with the broker to trade.

Additional Read: What is the procedure to open a Demat Account?

The Best Option for a Few Transactions

As a beginner, you may not carry out large volumes of transactions. In that case, there is a low-cost option available for you in the form of basic services Demat account or (BSDA). It was introduced by the Securities & Exchange Board of India (SEBI) to reduce the burden on small investors.

The annual maintenance charge (AMC) is lower in these BDSA accounts. For equity, there are no charges for holdings of up to Rs 50,000. For holdings of between Rs 50,001 and Rs 200,000, you will have to pay Rs 100. For debt securities, there are no charges for holdings of up to Rs 100,000, and Rs 100 for holdings of between Rs 100,001 and Rs 200,000. Holdings above this amount will be subject to regular charges.

BDSA is cheaper compared to non-BDSA accounts for which you will have to pay between Rs 500 and Rs 800 per year. So if you don’t intend to trade in securities on a large scale, make sure you opt for a BDSA account.

Is it worth having a Demat account?

A Demat account is a mandatory requirement for investing in shares. Even if you do not intend to trade in shares, it is always a good idea to have a Demat account. In the past few years, returns from equity have exceeded those from many other investment avenues. So at some point, you will have to invest in shares if you wish to build a sizeable corpus. Besides, you will need to have a Demat account if you plan to invest in certain debt securities like bonds or debentures.

Click here to check out a video that explains the ABCs and the importance of a Demat account.

Additional Read: Why Demat Account is a Must for Today's Investors

Disclaimer: The contents herein mentioned are solely for informational purpose and shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon.