The development of technology has caused a dramatic change in savings patterns in many countries. Many people have moved traditional fixed deposits to new alternatives such as stocks and shares, and many more. These have increased the use of Demat accounts.
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Investing in shares and security often requires opening a Demat account and has become increasingly popular over the years. Its popularity has scaled new heights and gained massive attention.
What is a Demat account?
A Demat account is a digital platform for investing in shares and securities in an electronic form. It helps keep your investments secure. These include mutual funds, gold bonds, government securities, insurance plans, etc. It also converts your share certificates from physical to electronic form to make buying, holding, and selling of shares faster. These help keep track of your investments and provide greater accessibility.
Investors intending to trade in dematerialized securities must open a depository participant account. Investors can use a Demat account in two ways: Send a Demat Request Form to dematerialize their physical shares or buy and sell shares in Demat form directly through their Demat account.
Requirement for opening a Demat account
The documents required for opening a Demat account are minimal. These make the application easier for new applicants.The procedure is also simple and can easily be understood from beginning to end without experiencing any difficulties. Here are the documents needed for a hassle-free process and convenient opening of a Demat account.
- Proof of identity with the photo of the holder: (voters card, passport, driving licence, etc)
- Residential proof: (Registered lease agreements, landline telephone bills, electricity bills, insurance bills, etc).
- Proof of bank account: (Bank passbook, three-month account statement).
- Proof of income: (mandatory for the currency and derivatives segment)
According to the SBI guidelines, investors must submit all these documents to their broker or depository participant of their choice. The account will be open after verifying and authenticating these documents.
Charges paid for account opening
- Account opening fee
- Charges for Dematerialization of Share Certificate
- Charges for Rematerialization of Share Certificate
- Conversion of Mutual Fund Units
- Destatementization Charges
- Restatementization Charges
- Redemption Charges
- Safety or Custodian Charges
- Transaction Charges
- Postal Charges
- Annual Maintenance Charges
Guidelines for Demat account openings
Select depository participant
The first step to opening a Demat account is to choose a depository participant. When choosing a service provider, it is important to choose the one that offers features that fit your s[pecific needs. You can also choose through banks, stockbrokers, and online investment platforms.
Fill and submit your application form
Go to the website of your depository participant website and fill out the online Demat account opening form to open a Demat account. Fill in mandatory details. These include mobile number, email id, proof of residence, and others. Some depository participants allow you to open both trading and Demat accounts simultaneously. Therefore, do your research before choosing one.
Verify your documents
The in-Person Verification process is done after filling out your application forms. This process is mandatory for checking the validity of your records. You also need to share the bank details to carry out your transactions.
Signing of agreement
Your depository participant will ask you to sign an agreement to ensure everything you are doing is legal. The agreement also enlists all the depository participant’s and investors’ responsibilities and privileges.
Demant account activation
After signing the agreement, your depository participant will process your Demat account application. You will be given your Beneficial Owner Identification Number to access the account once your application is approved. Once this is done, you can start investing and transacting with it.
Benefits of opening a Demat account
Risk reduction
A Demat account is safer and more convenient when compared to a traditional account. It avoids theft, loss, or any potential damage.You dont have to worry about losing your money and other valuable assets.
Avoid forgery
There have been reports of financial documents forgery over the years and it has given many people sleepless nights. The risk of physical fraud of shares is high. But, the introduction of the Demat account has provided solutions to all these problems. They are 100% safe and guarantee 100% safety. The Demat account operates paperless. All your details and original data are also in your record. These avoid forgery or impersonation.
Reduce time and cost
Physical securities involve additional costs such as handling expenses, stamp duty, and many more. These charges are not added when using Demat accounts, and you only pay brokerage charges. Physical securities also take so much time, while a Demat account is instant, are seamless, and inexpensive.
The bottom line
Opening a Demat account is easy and convenient. But there are strict guidelines and rules to follow. These rules help navigate the best Demat account to open while avoiding stock loss.
