How to Use a Demat Account Online in India
Rajesh has been investing in the stock market since the transfer of ownership certificates took place physically. But due to the change in SEBI's (Securities Exchange Board of India) trading norms, he has to open a Demat account and get his shares dematerialized. Since he was used to dealing in shares in the physical form, he is curious about how to use a Demat account. Let's understand.
The ever-increasing popularity of Demat accounts indicates that Indian investors are gradually moving from traditional investment instruments such as fixed deposits, gold, and real estate to equities and derivatives.
Important terms related to Demat account:
1. Demat account:
A Demat account, also known as a dematerialization account, is a system that allows an account holder or investor to electronically store and trade stocks, bonds, ETFs, mutual funds, and other securities. Not only is it safer to keep your securities in electronic format, but it's also less burdensome and easier to access your trades. As a result, Demat accounts appear to function similarly to bank accounts, except when you use them for trading.
Essentially, a Demat account is a repository that allows an investor to store and trade stocks, bonds, and other securities in an electronic format.
2. Nomination Facility:
When opening a Demat account, you can name a person as a nominee. That ensures that the assets in the Demat account holder in the Demat account are transferred to the nominee on the account holder's death or incapacitation. This way, you can avoid the lengthy and cumbersome transmission of holdings in the Demat account.
A demat account holder can either singly or jointly appoint a nominee. A maximum of three individuals can be selected as a nominee for a Demat account. All the joint holders must sign the nomination form if the account is held jointly.
3. Power of Attorney:
You can give a power of attorney (POA) to another person. The POA authorizes the person to manage your Demat account on your behalf on the terms and conditions contained in the POA.
Power of Attorney (POA) is a legal document that extends the broker authority to operate your Demat account as per the agreed terms signed by you. The POA is part of the Demat account form and can be signed digitally or on paper.
If your details like address, bank, or signature change, you don't need to notify all of the invested companies. You just need to inform the depository participant, and the information shall be updated in the records of the relevant companies where you have invested.
You can request changes to your trading or Demat account. These include but are not limited to modification of email address and mobile number, modification of permanent address, modification of bank or primary DP account, and changes in income, occupation, and nomination.
A Statement of Account is an in-depth description of transactions that have taken place through the Demat account. In contrast, the Statement of Holdings gives the current balance, a combination of Locked-in Balance + Free Balance + Pledge Balance.
You can receive periodic statements detailing your current holdings and transactions undertaken in your Demat account. You can choose to accept the statements in paper form mailed to your registered address or receive electronic statements via email.
Additional Read: What is Demat Account, its Meaning, Type and Process
How to Open a Demat Account?
The standard steps to open a Demat account online include-
- Choose a Depository Participant (DP) and submit the account opening form
- Fulfil the KYC (Know your customer) procedure
- Complete the process of verification and sign the agreement copies with the DP
- On approval, you will get your unique Beneficial Owner Identification Number (BO ID)
Opening a Demat account these days is easy. You will receive a Beneficial Owner Identification Number (BO ID) once your application has been approved, using which you can access your Demat account.
Now that the account is created let's understand how to operate the Demat account.
How Does a Demat Account Work in India?
A savings account is the first thing you need to open a Demat account. Once you buy the securities funded from your bank account, they are credited to the Demat account that holds these securities for you. However, if you want to sell and buy these securities frequently as a trader, you also need a trading account. Nowadays, most brokers provide a 3-in-one trading account, so you can start trading very conveniently.
How to Use a Demat Account?
- Access your online Demat account with your client ID or account number
- You will be able to see all your holdings in the form of shares, securities, bonds, or mutual funds in your portfolio
- Once you get a Demat account, you are also required to get a Trading account for trading
- After the account opening, you will need to link your Demat account and trading account along with your bank account
- After you've linked your accounts, you'll need to request an order through your trading account before you can start trading. Then, your broker will connect you to the appropriate trading exchange where you can execute your trade
- Your order will be processed at the exchange electronically
- Your Demat account will then be debited or credited depending on the transaction you undertake, and you will receive a confirmation message on your email and SMS
You can use the Demat account to check share market updates live as well as analyze investments as they occur. You can also set automatic buy and sell instructions and alerts that will allow you to invest in a timely manner.
The most convenient way to buy and sell shares, stocks, and derivatives is through a Demat account, which offers numerous advantages. Learning the ins and outs of a Demat account will assist you in making informed decisions when you are investing and trading in the stock market.
Before opening a Demat account, make sure to learn about all these factors to maximize your returns and protect your investments. Demat and trading accounts are essential to take advantage of India’s thriving financial markets. Open one today to kickstart your investment journey.
1. What is a Demat Account, and how do you use it?
A Demat account is primarily for holding all your dematerialized shares and securities in an electronic format so that you can quickly start trading without the risk of losing or damaging physical documents. You can use it for various functions, from buying and selling shares to gaining information about the stock market.
2. Can I keep money in my Demat account?
A Demat account is where your shares, mutual funds, and other securities are stored electronically. It does not deal with any cash transactions.
3. Can I buy shares without a Demat account?
It isn't possible to trade without a Demat account.
4. Can I transfer money from my Demat account to my bank account?
Trading account is where the cash flow happens. This account gets debited/credited whenever you buy/sell stocks. If you wish to withdraw funds, it can be done from the trading account, not the Demat account.
5. Can I sell shares in Demat account?
Yes, you can sell shares from your Demat account.
Disclaimer: ICICI Securities Ltd.( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288 2470. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. Investments in securities market are subject to market risks, read all the related documents carefully before investing. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents are solely for informational and educational purpose.