Earlier, securities were held in physical form that was cumbersome and risky. After the Depositories Act of 1996 came into existence, National Securities Depository Limitedwas incorporated in 1996, and three years later, in 1999, the Central Depository Limitedwas formed. This paved the way for holding shares digitally in a Dematerialised Accountor a Demat Account. Therefore, trading and settlement improved significantly.
It is an organisation that holds securities (like Shares, Debentures, Bonds, Government Securities, Mutual Fund units, etc.) of investors in electronic form. A depository is like a bank. NSDL and CDSL are the two depositories that are authorised for this purpose. It is mandatory to trade or invest in listed companies in India through a DematAccount.
You cannot Open a Demat Account directly with the NSDL or CDSL. A depository participantis an agent through which the account gets opened. Banks, Stockbrokers, NBGCs, to name a few,are DPs.
Being a digital account, the Demat Account offers a host of benefits:
- Physical certificateeliminated: Shares certificated get held inDemat form than physically.
- Easy and secure: Securities held in the Demat are safe and secure from theft, mutilation, etc.
- Easy record-keeping: The transaction statements are electronically available and hence, easily accessible, recorded, and reconcile.
- Benefits credited directly: Benefits like bonuses, splits, IPO allotments, or other benefits get credited to the Demat directly.
- Credited to Bank Account: Dividends and IPO refunds alsoget credited into the bank account mapped with the Demat Account.
- Consolidated Account statement: Theyprovide combined statements of transactions done across all investments held in Demat, like Mutual Funds, Shares, Bonds, etc. CAS statement gets sent by NSDL or CDSL periodically.
How to open the account?
Open them online by submitting the requisite documents. Before opening the account keep the KYC documents like PAN card, Aadhaar, and bank details handy. Make sure that the Aadhaargets linked with your mobile and PAN card. Following are the steps to open the account are:
Step1:Choose the DP with whom you want to open the account. Stockbrokers offer both Demat and Trading Accounts. You also get them linked to your Bank Account.
Step 2: Fill out the Demat Account opening form with the details, including the Bank Accountinformation. Do not forget to fill in nominations and map the Trading Account.
Step 3:Upload KYC documents like ID proofs, address proofs, bank statements, cancelled cheque, photo,signature on a blank paper, etc., if you are opening online. If not, you need to submit self-attested photocopies along with the account opening form.
Step 4:If online account opening, in-person verification gets done over webcam.
Step 5: Now, sign the account opening forms and agreements digitally.
Step 6: The DP processes the documents, approves the account opening, and issues a beneficial owner identification number. This is a 16-digit unique identification number.
As per SEBI, the investors must pay the following charges:
- Dematerialisation and rematerialisation of their securities
- Annual account maintenance charges
- Transactions fees (only for sell transactions)
Disclaimer – ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. – ICICI Venture House, AppasahebMarathe Marg, Prabhadevi, Mumbai – 400 025, India, Tel No : 022 – 6807 7100. 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 above are solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments or any other product. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.