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What is a Demat Account?

If you are in the phase of starting your financial journey (stock investing), you would have heard of the term 'Demat account'. It is the first stone that you lay for your journey. And needless to say, it has to be selected correctly.

To do the right thing, you need to understand the term. In this article, we will discuss everything related to the Demat account, so pay attention to all the sections.

Understanding Demat Account

The first thing we will focus on is the Demat account's meaning. You can think of a Demat account as a digital wallet for your stocks and investments. Instead of handling physical certificates, a Demat account holds your stocks and securities in an electronic form - how your digital wallets hold money instead of cash.

It makes buying and selling shares easy, just like online shopping. Each of your investments is neatly stored in this virtual account, making it convenient to track and manage your holdings.

Before we discuss how to open a Demat account, let us understand when a Demat account comes into the picture and what exactly happens at the backend. When you buy a company's shares, instead of getting physical certificates, those shares are credited to your Demat account electronically. Similarly, when you sell your shares, they are debited from your Demat account.

For example, if you buy 10 shares of Infosys Limited, those shares will be stored in your Demat account. If you decide to sell 5 of them, the Demat account will reflect that change. It makes buying and selling investments easy and secure, eliminating the need for physical paperwork.

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Margin Funding interest rate to buy stocks
9.65% P.A.

Margin Funding interest rate to buy stocks

Intraday Trading Brokerage Charges
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Intraday Trading Brokerage Charges (Unlimited per order)

Features Of ICICI Direct Demat Account

A Demat Account makes financial transactions easy and convenient - features of Demat Account include.

Simplified buying and selling of shares

Simplified buying and selling of shares

A Demat Account helps in buying and selling shares online. Formerly, transferring shares physically would take anywhere between a fortnight to a month. A Demat Account ensures a simplified process with reduced costs. Besides, holding securities in the electronic form does not require stamp duty when transferring them.

Transfer securities electronically

Transfer securities electronically

With a Demat Account, users can transfer securities online in seconds. Delivery Instruction Slips [DIS] are used to transfer securities from one Demat Account electronically.

Loans on your securities

Loans on securities

When choosing an online Demat Account opening, users benefit from taking a loan on their securities. Pledging securities held in the online Demat Account as collateral can help obtain necessary funds when needed.

Receive dividends directly

Receive dividends directly

Users can receive stock dividends and bonus issues of shares released by companies directly and safely through a Demat Account.

Quicker dematerialization and rematerialization

Quicker Dematerialisation and rematerialisation

Upon providing instructions to the DP, users can convert physical certificates into electronic forms whenever needed. Certificates can also be converted into physical form if required through rematerialisation.

Option to freeze the account

Option to freeze the account

A Demat Account can be suspended for a specific period whenever needed. This feature comes in handy when users avoid unexpected debits or credits into their Demat Account. Users can also opt to freeze their Demat Account for a specific number of securities in the account.

Accessing multiple options

Accessing multiple options

A user can operate a Demat Account electronically through various devices and modes. A Demat Account can be accessed via a computer, laptop, and other smart devices through the Internet.

Easy access to the Indian stock market

Easy access to the Indian stock market

Non-Resident Indians can also open a Demat Account and invest in shares in the Indian stock market through their NRE or NRO bank account.

Features and benefits of a Demat account

Invest in various financial products: Besides stocks, Demat account allows you to invest in various other financial products too like Futures and Options, Commodity, Currency, Bonds, Exchange Traded Funds (ETFs), Mutual Funds,etc.

Easy Portfolio Monitoring: Demat account also comes in handy to monitor, review and modify your investment portfolio easily from anywhere.

One stop storage: Users can track their investments and transactions through a single Demat Account.

Swift settlements: A Demat Account reduces settlement cycles, thus saving users time and effort.

Safety and Security of assets: There is no fear of loss, theft or damage to the stocks and securities owing to the Demat Account's digital format.

Elimination of odd lots: Buying and selling of single units are possible with a Demat Account.

Reduced costs: Stamp duty and other handling costs are eliminated due to the digital format.

Easy liquidation and monetization: A Demat Account offers easy liquidation of assets.

Effortless KYC Updating: Users can easily update any change in address, mobile number or nominee details via a single Demat Account.

Easy transmission: A joint Demat Account can add a next-of-kin as a nominee to effortlessly transfer assets.

Auto transfer of corporate benefits: Get automatic update of corporate actions such as dividends, bonus issues, right shares or stock splits in the Demat account.

Remain Informed: Get all the latest news, analysis, stocks and company information to remain informed in the market and take the right decisions.

Things to know before opening a Demat Account

Account opening eligibility

The following investors are eligible to open a Demat Account:

  • Any resident Indian with a PAN can open an account.
  • Hindu Undivided Family (HUF) can open a Demat account. The account will be opened in the name of the leader or the eldest male member of the family.
  • Non-Indian Residents (NRI) can also participate in the Indian financial markets by opening a Demat Account. The investor has to specifically inform the DP that it is NRI Account.
  • Domestic companies are also eligible to open an account.

Account opening charges

There are various charges associated with a Demat Account, which are as follows:

  • Account opening charge – It is the fee a depository participant (DP) levies on you to open a Demat account. The charges vary from DP to DP.
  • Annual maintenance charge – You are required to pay an annual maintenance charge as long you hold the Demat Account with the DP. You are liable to pay this charge irrespective of whether you use the account or not.
  • Dematerialisation charge – You must pay a specific charge to convert your physical share certificates into the electronic or dematerialized format. This fee is known as the Dematerialisation charge.

Multiple Account Holding

  • If you are wondering if it is possible to have more than one Demat Account, then the answer is yes. There is no restriction to the number of Demat Accounts you can open as long as they are opened with different DPs. Every account should be linked to your PAN card as per the mandatory Know Your Customer (KYC) requirement. You have the option to assign a nominee to your account.

List of Documents Required to Open a Demat Account

To open a Demat Account requires specific documents. Below is a complete checklist of documents to open a Demat Account.

  1. PAN Card

    It is mandatory to enter correct PAN details in the account opening journey. Image of PAN Card required only if PAN verification fails.

  2. Signature

    Sign on a white paper and upload its picture. Ensure that your signature matches the one on your PAN card.

  3. Proof of bank account

    As proof of your bank account enter correct IFSC code and bank account number. Image of a cancelled cheque or your bank statement/passbook for the last six months required only if Bank verification fails.

  4. Financial document

    To trade in derivatives such as F&O, you need to submit the soft copy of the Income Tax Return (ITR) statement, salary slips for three months, bank statement for six months, net-worth certificate, Demat holding statement, or holding report. This is optional and not mandatory.

Types of Demat Account

There are multiple types of Demat accounts, so before you open a Demat account, you must understand the categories. You must understand your needs and consider relevant factors before deciding. The below table helps you understand the different types of Demat accounts.

Type of Demat Account

Description

Regular Demat Account

Standard Demat account for residents, allowing the holding and trading of various financial securities such as stocks, bonds, and mutual funds.

Repatriable Demat Account

Specifically designed for Non-Resident Indians (NRIs), this account allows the repatriation (transfer back) of both the sale proceeds of investments and the capital invested.

Non-Repatriable Demat Account

Another option for NRIs, this account also caters to the Non-Repatriable category, meaning that funds (capital and profits) must be maintained within India and cannot be repatriated.

Basic Service Demat Account

Designed to make demat account services accessible and affordable for small investors (Students). It comes with certain limitations and concessions to cater to the needs of individuals with fewer holdings. 

 

Eligibility Criteria to Open Demat Account

Below are two eligibility criteria to open a Demat account:

  • Age Criteria: Individuals who are 18 years or older are eligible to open a Demat account. In some cases, minors can also have a Demat account with a guardian's consent.
  • KYC Compliance: Know Your Customer (KYC) compliance is mandatory. It involves providing identity proof, address proof, and photographs. Documents like Aadhar cards, PAN cards, passports, voter IDs, and utility bills are commonly accepted for KYC.

 

Charges of Demat Account

There are different charges you need to pay for using your Demat account. The actual charge will vary depending on your DP. We are highlighting the different charges for the Demat account, so you are prepared for it:

Account Opening Charges: DPs charge a one-time fee when you open a Demat account. The charge covers the administrative costs of setting up the account.

Annual Maintenance Charges (AMC): AMC is an annual fee for maintaining the Demat account. It is a recurring charge and varies among DPs. Some DPs offer lifetime free AMC for the first year or for a specified duration as part of promotional offers.

Transaction Charges: Transaction charges are incurred for every buy or sell transaction conducted through the Demat account. These charges may be based on the transaction value or the number of securities traded.

Additional Service Charges: DPs may charge fees for additional services, such as a physical account statement, SMS alerts, or email statements. These charges are usually optional and depend on the investor's preferences.

Before you go: Choosing the Right Type of Demat Account

As you have seen, we have different types of accounts. The first thing you need to figure out is the best option for you. Once you have done it, you must also factor in the charges the DP is charging and finalize the account. 

Another thing you can do is seek recommendations from experienced investors. Additionally, read reviews and testimonials about the DP to gauge the experiences of other users.

Various Investment Options with Demat Account

Trade in Equities & Derivatives

Derivative market refers to the buying and selling of an underlying asset. An individual can participate in the equities as well as the derivatives market by opening a demat account. The demat account helps traders hold shares and other securities.

Invest in Mutual Funds

A mutual fund is a financial instrument which pools in money from several investors to purchase a diversified portfolio. Systematic investment plan (SIP) and lump sump are the two ways to invest in a mutual fund. With the help of an ICICI Direct demat account, one can invest in a SIP with just one click.

Invest in Exchange Traded Funds (ETFs)

An exchange traded fund invests in multiple underlying assets rather than just one. Investors receive an interest for putting their money in the fund. A demat account holder can opt for this basket index fund.

Trade in Commodities

The commodity market deals in raw products rather than manufactured products. It involves buying and selling of goods such as crude oil, gold, coffee, silver, and so on. In order to trade in the commodity market a demat account is required along with a commodity trading account.

 

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Demat Account FAQs

To know more about its charges, visit

https://www.icicidirect.com/services/brokerage/prime-plan

To open your demat account, it typically takes 2 to 5 working days — depending on the kind of account.

After submitting your demat account application form, the Depository Participant [DP] will carry out the necessary verification of the information you provided in the form. On successful verification, you will be provided with your login details. In the event that your application is not processed, due to any missing information, you will be notified by our representative.

Typically, there are three different types of demat accounts: a regular Demat Account, Repatriable Demat Account and Non-Repatriable Demat Account.

A Joint Demat Account is a dematerialized account in which two or more individuals can hold and manage securities (such as stocks, bonds, and mutual funds) jointly with equal rights. These individuals could be, for example, family members, business partners, or friends.

A 3-in-1 demat account is an account that combines three essential components into a single integrated package for seamless trading and investing. The three components are:

 

Demat Account: This is the account where you hold your securities such as stocks, bonds, and other financial instruments in electronic form. 

Trading Account: A trading account is used for buying and selling securities in the stock market. The trading account is linked to your demat account for the seamless transfer of securities during transactions.

Bank Account: The bank account is linked to the demat and trading accounts to facilitate the transfer of funds for buying and selling securities

There is no minimum balance requirement for a Demat account.

The process will vary from DP to DP. Here are the steps you need to follow if you have an account with ICICI Direct:

 

Login to ICICI Direct website.

Look for the 'Customer Service' page.

Go to the 'My Account' section.

Scroll down to the 'My Account Details' section.

You will find your demat account number in this section.

The nominee addition details vary from platform to platform. If you have an account with ICICI Direct, you can add nominees through online and offline routes. For the online route, you can log in to your account go to the Settings section, and add the nominee details.

Yes, it is possible to transfer shares from one Demat account to another. This process is known as Demat account transfer.

In general, the option will be available under the 'Fund' section of your account. You can log in to your DP account, look for 'Funds', and under it, you will see the 'Withdraw Funds' (or something similar) option. Click on it and submit the request.

Mutual funds in India can be held in two primary forms: in physical form (paper certificates) or in dematerialized (Demat) form. Therefore, a Demat account is not mandatory for mutual funds.

Yes, it is possible to have more than one Demat account. You may choose to open multiple Demat accounts for various reasons, depending on your financial needs and preferences.

Yes. A demat account is generally considered a safe and secure way to hold and manage your financial securities. They are regulated and managed by the Securities and Exchange Board of India (SEBI), which oversees the functioning of Demat accounts and depository participants.

No, a Demat account is not required for investing in Systematic Investment Plans (SIPs) of mutual funds.

As of October 2023, the number of demat accounts in India is 13.22 crore.

You need to have KYC documents and a PAN number to open your demat account.

ICICIdirect Demat account is one of the best options for beginners.

Yes. A government employee, like any other individual, can open a demat account.

Checking the shares in your Demat account involves accessing your Demat account statement, which provides a detailed overview of the securities held in electronic form. The process may slightly vary depending on your Depository Participant (DP), but here are general steps you can follow:

 

Log In to Your Demat Account

Navigate to Holdings or Portfolio Section

View Detailed Holdings

Filter by Asset Class

Check Transaction History

Your demat account number is not typically directly associated with your PAN (Permanent Account Number) card. The Demat account number is assigned by your Depository Participant (DP) when you open a demat account with them. However, if you have your PAN card and need to retrieve your demat account number, you can follow these steps:

 

Check demat account statements

Contact customer support

Check welcome kit or account opening documents

Visit DP's Office

Converting physical shares into electronic or Demat form is a process known as \"Dematerialization.\" The process involves converting the physical share certificates into electronic form, and the resulting electronic securities are then credited to your demat account. Here are the general steps to convert physical shares into a Demat account:

 

Open a Demat Account

Complete KYC Process:

Fill Dematerialization Request Form (DRF)

Provide Details of Physical Certificates

Submit DRF and Physical Certificates

Verification Process

Cancellation of Physical Certificates

Credit to Demat Account

In the context of a Demat account, \"DP name\" refers to the name of the Depository Participant (DP) with whom an individual holds their Demat account. A DP is an entity registered with the depository (such as NSDL or CDSL) and acts as an intermediary between the account holder and the depository.

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. AMFI Regn. No.: ARN-0845. PFRDA registration numbers:  POP no -05092018. I-Sec acts as a Composite Corporate agent having registration number –CA0113. Investments in securities market are subject to market risks, read all the related documents carefully before investing.Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. Please note, Mutual Fund, Corporate Fixed Deposits, Bonds, IPO and Loans related services are not Exchange traded products and I-Sec is acting as a distributor to solicit these products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. Please note, Insurance related services are not Exchange traded products and I-Sec is acting as a corporate agent to solicit these products. The contents herein above 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. The contents herein mentioned are solely for informational and educational purpose.