The introduction of the Demat Account has discarded the need for cumbersome paperwork. It has allowed investors to carry out their trading activities conveniently. It has also made monitoring investment portfolios a lot easier. But how exactly does this account work? A Demat Account holds all your investments digitally. These include your bonds, government securities, ETFs, Mutual Funds, etc.
It is linked to your Trading and Bank Account to help you trade and receive the returns systematically. It is also backed by either of the two primary depositories in India:
- National Securities Depository Limited (NSDL)
- Central Depository Securities Limited (CDSL)
Both these entities are regulated by the Securities and Exchange Board of India.
Opening criteria& process
A Demat Account opening is possible without the involvement of a broker. You can choose a Depository Participant and fulfil the mentioned formalities. But you need to approach a broker to participate in the Stock Market transactions. The following are the steps to open a Demat Account without a broker:
Step 1: Select a Depository Participant
To open a Demat Account online, first, find a reliable DP. For appropriate selection, look for the best DP services in India through banks, online investment platforms, stockbrokers, etc. Then, compare their offerings to pick one that satisfies your needs.
Step 2: Fill & submit the opening form
Visit the selected DP’s website and fill out the application form for opening a Demat Account online. While doing so, submit the correct information to avoid discrepancies.
Step 3: Comply with the KYC requirements
After completing the application, it is time to comply with the specified KYC requirements. In this step, DPs usually ask for proofs like:
- Identity proofs (PAN Card)
- Address proofs (Aadhaar Card)
- Bank Account statement
- Income proofs
Keep these and other relevant documents handy for a smooth KYC experience.
Step 4: Complete the verification process
Once you submit all the details, you should complete the verification process. The DP cross-examines your information like Trading Account, PAN Card, income proofs, etc. Some DPs might even request a virtual or in-person meeting to assess your credibility.
Step 5: Sign the agreement
Post verification, you need to sign a contract with your DP. This agreement specifies you, the investor, and the DP’s rights and responsibilities.
Step 6: Receive your BO ID
Upon completing the mentioned steps, you receive a specific Beneficiary Owner ID and password. Your Demat Account gets activated and is ready for use. You only need to log in using the ID and password to start trading.