Know What is the Procedure to Open a Demat Account
A Demat or Dematerialised account is an account used to provide an electronic facility for holding shares and securities. Such an account has all investments, including government securities, shares, ETFs, mutual funds, and bonds, in electronic form for ease of use. In India, the Demat account facility is provided by depositories such as NSDL (National Securities Depository Ltd) and CDSL (Central Depository Services India Ltd). These Demat services facilitated by depository participants, intermediaries or stockbrokers, charge based on the volume in the account and the type of subscription.
You can open a Demat account via a Depository Participant (DP), with either a bank or broker, or by online registration at any leading firm. Once the account is active, the actual shares are held by any one of the two National depositories of India, NSDL and CDSL. Every DP has to be a member of any one of the depositories. Demat account opening is combined with a Trading account. A Demat account holds the securities, and a Trading account facilitates the trading of those securities.
An account with NSDL and CDSL is identified from their different formats. For CDSL, the Demat account is a 16-digit unique number issued when opening the account. For NSDL, the Demat account has an alpha-numeric formation that contains ‘IN’ followed by the 14-digit unique account number.
Additional Read: 7 Important Things to Know all about a Demat Account
The Procedure for opening a Demat account comprises of the following steps:
Choosing a Depositary Partner (DP)
A depositary partner can be a financial institution, an authorized bank, or a broker. Usually, many traders prefer opting for those DPs who can double as a stockbroker to access both services under the same banner. Before deciding on a depository partner, you need to be well aware of the brokerage they charge, their value-added services, and the leverage they offer.
Additional Read: Maintenance Charges for Demat Account
Also Watch: All you need to know about DPs
You need to fill out the Demat account form and the KYC form. The other documents required along with the two forms are
- PAN card
- Identity proof (Aadhar card, driving license, etc.)
- Income proof (ITR or salary slip)
- Passport size photograph of the person
- Address proof
Additional Read: Documents Required To Open A Demat Account
Receipt and reading rules and regulations
After verification and documentation, a copy of the rules and regulations is given by the depository partner to you. It is always a good idea to seek assistance in understanding the directions thoroughly before you sign on the dotted line
Accessing and operating the account
The credentials of the account are given by the DP to you when your account is made active. It is necessary for operating the account.
To open a Demat account online, you have to follow the steps given below:
- Filling and submitting brokering firm’s account opening form together with the required KYC details, that is, date of birth, PAN card, email address, and bank account.
- The Depository participant’s KYC form forms the DP-Investor agreement, i.e., an agreement between you and the DP. This contains the rules and regulations, obligations, and rights as an investor.
- Then an OTP is received on your registered mobile number, and the details of the account are shared on your registered email ID.
- At times, the DP firms require an in-person verification, which can be done by the DP visiting your residence or a branch visit by you.
- Once the verification is done, the Demat number is sent to you.
Financial markets have proved to be a source of prosperity for many. And opening your Demat account can be your first step in these financial markets. But, remember, a Demat account has yearly charges irrespective of your activity level. So open an account only if you will actively use it.
Also Read: How to Buy & Sell Shares in Demat Account?
The key to maximizing the utilization of Demat is knowing to identify a suitable DP who could give you good facilities and services to make your investments easy and smooth. Select a DP based on your readiness and knowledge for venturing into the markets. If you are well-versed with the working of the markets, you could settle for a discount broker who may charge you only for brokerage services. Alternately, if you are a beginner here, you may need trading tips, investment consultancy, expert research, etc., in addition to traditional broking services, to ferry you across uncharted waters. In that case, opting for a full-service broker will always be a better idea.
Additional Read: How to Choose the Best Broker?
Also Read: How to Invest Without a Demat Account?
1. How much money is required to open a Demat account?
The money required to open a Demat account varies from broker to broker.
It may range from Rs. 0-500, and in some cases, even more. Typically, the money required for opening a Demat account depends on whom you open your account with (banks/discount brokers/full-service brokers/online platforms/other financial institutions), your account type, and the services offered to you. Some brokers may even open your account for free. But, they may levy transaction and maintenance charges later. Basic service accounts where the transactions are limited to Rs. 50000, come with no Annual Maintenance Cost. In contrast, full-service accounts that offer a host of services and facilities besides traditional broking come with longer bills. The fee structure and pattern also vary. Some DPs charge you consistently each year, while some DPs may also not charge you for the first year after account opening and levy charges from the following year onwards. Some may have one-time fixed costs, while some have monthly/quarterly/annually maintenance cost components.
2. How many days does it take to open a Demat account?
The time required to open a Demat account varies from broker to broker and also depends on whether you open the account online or through the offline route. The online process is relatively quicker than the offline route.
If you choose to open an account online, you can open an account in a day after you have submitted your online account opening form along with the required set of verification documents.
The offline process may take more than one day as it involves an in-person verification after the form and documents are submitted.
3. What is the minimum balance for a Demat account?
You do not need any minimum balance of money or securities for a Demat account.
A Demat account holds shares and other financial market securities in electronic form. Hence, there is no minimum balance requirement in it. You can operate it with zero balance.
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 the 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 purposes.