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How to Open a Demat Account Online

18 October 2021
5 minutes

With the moving types of accounts today, beginning from a savings account, fixed accounts, NRI accounts all the way to a Demat account. But what is a Demat Account? Let’s find out.

What is a Demat Account?

A Demat Account, also known as a Dematerialised Account, allows you to keep shares and assets in an electronic format. Shares are purchased and stored in a Demat Account while online trading, making it easier for consumers to trade. A Demat Account consolidates all of an individual’s interests in stocks, government securities, exchange-traded funds, bonds, and mutual funds.

What is Dematerialization?

Dematerialization is the process of turning physical share certificates into electronic form, which is much easier to maintain and can be accessed from anywhere on the globe.

An investor who wants to trade online must first create a Demat account with a Depository Participant (DP). The goal of dematerialization is to remove the requirement for investors to maintain physical share certificates while also allowing for seamless tracking and monitoring of holdings.

Why Do You Need a Demat Account?

A Demat account is a simple and technologically secure way to keep shares and assets. It prevents physical certificate theft, forgery, loss, and damage. You can transfer securities quickly using a Demat account. The shares are digitally transferred to your account after the deal is authorized. Furthermore, in the event of events such as stock bonuses, mergers, and so on, shares are automatically credited to your account. By login into the website, you may see your Demat account information regarding these actions. You may trade on the go using your smartphone or desktop computer.

As a result, you do not need to go to the stock exchange to deal. You also save money on transaction fees because there is no stamp duty involved in the transfer of shares. These advantages and benefits of a Demat account encourage investors to trade more frequently, boosting the possibility for profits.

How Exactly Does a Demat Account Work?

Trading with a Demat account is comparable to trading in person, except that a Demat account is electronic. You start trading by entering an order into your online trading account. Both trading and Demat accounts must be linked for this reason. When an order is placed and it is processed by the exchange. Before final processing of the order, the Demat account information the market price of shares, and the availability of shares is checked. Following the conclusion of the procedure, the shares are shown in your statement of holdings.

When a shareholder intends to sell shares, a delivery instruction letter detailing the stock must be given. The account is then debited for the shares, and the cash value is credited to the trading account.

There are three types of Demat accounts that you can open, and if you are an Indian resident, you will be primarily dealing with equity trading and investment. So, you can find these three accounts.

Types of Demat Accounts

  1. Regular Demat Account: These are dematerialized accounts for Indian people. If you are an Indian resident who primarily deals with equities trading and investing, the standard Demat account is suitable for you.
  1. Repatriable Demat Accounts: Non-resident Indians can choose between two types of Demat accounts. A repatriable account, as the name implies, it allows you to move cash overseas if you are an NRI. To enjoy repatriation of your funds, you must link this account to a Non-resident External (NRE) bank account.
  1. Non-Repatriable Demat Accounts: You can also open a non-repatriable account if you are a non-resident Indian. This account does not enable you to transfer funds outside of the country. It must be connected to a bank account in the name of a non-resident ordinary (NRO).

How to Open Demat Account?

– Choose a Depository Participant (DP), which may be any licensed bank, financial institution, or broker, with whom you want to create a Demat Account. The choice of a DP should preferably be based on the brokerage fees, yearly fees, and leverage is given.

– Along with this, you need to submit a duly filled account opening form with attached documents of:

PAN

Resident proof

ID proof

Passport size photos

– You will next be required to sign an agreement outlining all of the rules, restrictions, and rights connected with having a Demat Account. Read them carefully and don’t be afraid to ask questions if you have any. When you submit this to the DP, it will be signed by an authorized person and you will be given a copy.

– When the account is opened, the DP will provide you with a unique Client ID. This, along with other information, will allow you to gain online access to your Demat Account.

– The DP will also provide you with instruction sheets that you may use for depository services like transfer, purchase, and so on.

How to Open a Demat Account Online?

A request to create a Demat Account with any DP can also be made online.

– Visit a DP website.

– Click on ‘Open Demat account’ and follow the directions.

– After you enter the details, you will get an OTP.

– You will receive communication from the DP in order for them to contact you in order to complete the above-mentioned formalities and open a Demat Account.

Also Read: Steps to Open Demat Account on Groww

Conclusion

You know that earlier securities used to be held in the form of papers, and this meant it could also lead to tapism, fraud, theft, and displacement. But with a Demat account, you can hold your securities in an electronic form. Today, for anyone who wants to trade in the stock market, a Demat account stays essential. So, now that you know how to create a Demat account, you can go ahead and get it done.

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