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How to Use a Demat Account Online in India

Introduction:

Rajesh has been a stock market investor since trading used to take place in the form of physical transfer of share certificates. 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. Rajesh opened two Demat accounts with two different Depository participants (DP), segregating his investment portfolios. 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 -

Important terms related to Demat account:

a. 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.

b. 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.

c. 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.

d. Modifications:

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.

e. Statements:

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.

After knowing the terms, let's move one step ahead to know how to get yourself a Demat account.

How to open a Demat account?

The standard steps to open a Demat account online include-

  1. Choose a Depository Participant (DP) and submit the account opening form
  2. Fulfil the KYC (Know your customer) procedure
  3. Complete the process of verification and sign the agreement copies with the DP
  4. On approval, you will get your unique Beneficial Owner Identification Number (BO ID)

Now that the account is created let's understand how to operate the Demat account-

How to use the Demat account?

  1. Once you get a Demat account, you are also required to get a Trading account for trading
  2. After the account opening, you will need to link your Demat account and trading account along with your bank account
  3. 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
  4. Your order will be processed at the exchange electronically
  5. Your Demat accounta will then be debited or credited depending on the transaction you undertake, and you will receive a confirmation message on your email and SMS

Additional Read: ICICI Direct- How to trade using Demat account

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.

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.

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