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How To Open A Demat Account

Author: Team Finapolis/Monday, December 1, 2014/Categories: Stocks

How To Open A Demat Account

A dematerialized or demat account is like a bank account, where instead of money you keep shares, bonds, government securities, mutual funds and exchange traded funds (ETFs) in an electronic format.

To open a demat account you need to approach a Depository Participant (DP), which are basically agents of depositories such as National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) to provide demat services to investors. These agents are appointed by NSDL / CDSL with the approval of SEBI. According to SEBI regulations, amongst others, three categories of entities i.e. banks, financial institutions and members of stock exchanges [brokers] registered with SEBI can become DPs.

A depository can be compared to a bank. A depository holds securities like:

  • Shares,
  • Debentures,
  • Bonds,
  • Government Securities,
  • Mutual fund units etc of investors in electronic form.

Besides holding securities, a depository also provides services related to transactions in securities. If an investor wants to avail the services offered by the depository, the investor has to open an account with a DP (for instance, Karvy Stock Broking Ltd). This is similar to opening an account with any branch of a bank in order to avail banking services. You can select your DP to open a demat account just like you select a bank for opening a savings account. Some of the important factors for selection of a DP can be:

  • Convenience
  • Proximity to your office/residence, business hours.
  • Comfort

Reputation of the DP, past association with the organisation, whether the DP is in a position to give the specific service you may need?

Cost

The service charges levied by DP and the service standards.

In order to obtain the complete list of DP locations and their comparative charge structure, you may log on to NSDL/CSDL website.

You can approach any DP of your choice and fill up an account opening form. At the time of opening an account, you have to sign an agreement with the DP in a NSDL/CDSL prescribed standard agreement, which details your and your DP’s rights and duties. You have to submit the following with the prescribed account opening form. In case you want to open account jointly with other person(s), following should be submitted for all the account holders.

Proof of Identity: Copy of any one proof: Your passport, voter ID card, driving license, PAN card with photograph, identity card/document with applicant’s photo issued by a) Central/State Government and its Departments, b) Statutory/Regulatory Authorities, c) Public Sector Undertakings, d) Scheduled Commercial Banks, e) Public Financial Institutions, f) Colleges affiliated to Universities (this can be treated as valid only till the time the applicant is a student), g) Professional Bodies such as ICAI, ICWAI, ICSI, Bar Council etc., to their Members; and h) Credit cards/Debit cards issued by Banks.

Proof of Address: Copy of any one proof: Ration card, passport, voter ID card, driving license, bank passbook, verified copies of electricity bills (not more than two months old)/ residence telephone bills (not more than two months old)/ leave and license agreement / agreement for sale; self-declaration by High Court & Supreme Court judges, giving the new address in respect of their own accounts; identity card/document with address, issued by a) Central/State Government and its Departments, b) Statutory/Regulatory Authorities, c) Public Sector Undertakings, d) Scheduled Commercial Banks, e) Public Financial Institutions, f) Colleges affiliated to universities (this can be treated as valid only till the time the applicant is a student); and g) Professional Bodies such as ICAI, ICWAI, Bar Council etc., to their Members.

  • Passport-size photograph
  • Copy of PAN card

You must remember to take original documents to the DP for verification. Your DP will carry-out ‘in-person verification’ of account holder(s) at the time of opening your account. You should remember to obtain a copy of the agreement and schedule of charges for your future reference.

You can open more than one account with a DP and there is no restriction on the number of accounts. Also, there are no restrictions on the number of DPs you can open accounts with. Just as you can have savings or current accounts with more than one bank, you can open accounts with more than one DP.

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