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What is Demat Account – Know How to Open Demat Account Online

Every company enlisted on the Indian stock exchange is obligated to offer shares in both, physical as well as dematerialised form. In this, physical securities are the actual share certificates that provide information about company shares owned by an investor; whereas, dematerialisation refers to the process of converting the share certificates into an electronic form. Once the shares are converted into the electronic or dematerialised form, they are held in an investor’s demat account. Here is everything you need to know about demat accounts.

What is a demat account?

A dematerialised account, often referred to as a demat account was introduced by the Securities and Exchange Board of India or SEBI in 1996. The SEBI which serves as the country’s capital market regulator issued a decree mandating every investor wishing to trade in equity shares to own securities in dematerialised form. This demat account functions just like your bank account, in which, instead of money, you can hold shares, mutual funds, bonds and similar other investment securities. A demat account especially comes in handy for daily online-traders. You can purchase and sell securities using your demat account.

Depositories and Depository participants

Before we tell you how to open a demat account, it is important for new investorsto first get acquainted with some technical terms about demat accounts. Depositories and depository participants are the two terms that you should familiarise yourself with.

In India, there are 2 SEBI registered depositories which are

Your electronic securities are held by these depositories and you can conduct your transactions only through them.

The depository participants (DP) on the other hand are your agents or mediators that work between the investor and the twomaindepositories. As such, aninvestor must open the demat account with a DP.

How to open a demat account?

Here is the 4 step process in which you can open your demat account

Step 1: Choose a depository participant. Financial organizations such as banks, brokers, custodians etc. generally serve as depository participants. For example, Karvy Stock Broking Limited is a DP. The DPs serve as agents of the depository, making their services available for investors

Step 2: Fill up the account opening form and submit photocopies of the necessary documents mentioned in the form.

Step 3: Once you provide your documents, the DP conducts in-person verification.

Step 4: After verifying your credentials, you are provided with your unique account number by the DP, which you can use to access your online demat account

Things to remember while opening a demat account

KYC compliance

The Know Your Customer or KYC compliance is mandatory for opening your demat account. You must provide the following documents to your DP while opening the account:

Charges for opening a demat account

Now that you know how to open demat account for share market, let us take a look at the charges associated with your demat account.

Benefits of opening a demat account

There are several benefits of demat account. They are as under

As you can see, there are many advantages of demat account. If you haven’t yet, it is time to open a demat account.