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Investing in equity shares in physical form entails a lengthy procedure, lot of paperwork and risk of getting fake shares. In order to keep the entire experience easy and streamlined, a demat account is required. While trading online, demat account is used to hold shares and securities in dematerialised/electronic format. Under dematerialisation, your share certificates are converted from physical form to electronic form so as to increase their accessibility.
You need a Demat Account number to settle trades electronically. Having a Demat Account allows you to buy shares and store them safely. It is similar to a bank account in which you hold deposits with the bank and the record of debit/credit balances are maintained in a bank passbook. In the same way, when you purchase or sell shares, it will be credited or debited to/from your Demat Account respectively. It can be used to hold a variety of investments like equity shares, exchange traded funds, mutual funds, bonds, and government securities. You can open a Demat Account without possessing any shares. and can maintain a zero balance in your account.
A Demat Account is used to transfer share holdings of an investor. It can be done by using a Delivery Instruction Slip (DIS) in order to conduct share trading. You can provide all the relevant details in this slip for smooth execution of a transaction.
The securities held in your Demat Account can give you access to a variety of loans from the bank. You can pledge these securities as a collateral to secure a loan from your bank.
If you have a Demat Account, then conversion of the securities into different forms becomes a simple task. You can give necessary instructions to your depository participant (DP) for dematerialisation i.e. to get the physical share certificates converted into electronic form. Conversely, you can get the electronic securities converted back to the physical form as per your requirements.
Owing to electronic operation, a Demat Account can be accessed using numerous media. You can conduct investing, trading, monitoring and other security related operations using facility of the Internet on a computer, smartphone, or other handheld devices.
Having a Demat Account can help you avail benefits associated with owning securities. Whenever a company provides dividends, interest or refunds to its investors, all the Demat account holders get access to these benefits automatically. Additionally, corporate actions related to equity shares like stock split, right shares or bonus issue is updated in the shareholders’ Demat Accounts.
Demat account holders have the option to freeze their accounts for a specific duration, as per the requirement. It is done to avoid any unpredicted debit/credit into the Demat Account. To avail the freezing option, the account holder needs to hold a specific quantity of securities in his/her account.
The National Securities Depository Limited (NSDL) keeps extending various facilities for the Demat account holders. Instead of physical submission of the slip, the account holder may send instruction slips electronically to the depository participant. It is done to make the process faster and less cumbersome.
You may perceive a demat account just like a bank account which hold securities instead of money. The Demat account opening procedure and the mandatory documents required are similar across organisations. Before submitting any document having an expiry date, ensure that it is valid on the submission date.
Here is the detailed list of documents that you need for opening a Demat Account.
You may submit any one of these as a proof of income:
You may submit any one of these as a proof of identity:
You may submit any one of these as a proof of address:
You can open a Demat Account by following these easy steps: