Explained in Detail - The Demat Account

What is a Demat Account?

Demat Account is like a bank account except Demat holds the stocks in electronic form. A bank account holds money and a Demat account holds financial certificates of instruments like bonds, shares, government securities, mutual funds, and exchange-traded funds.

How to open a Demat account?

The fastest and quickest way is to select a brokerage firm and opt for Online Account opening. This is paperless mostly and does not take more than 10 minutes if all documents are ready.

This, however, was not always the case and before the advent of internet and camera phones it was not that easy. The steps for opening the Demat account are,

1. Select depository participant (DP)
2. Fill account opening form
3. Submit documents for verification
4. Sign a standardized agreement with DP
5. Verification of Documents
6. Demat Account number and ID generation

What are the advantages of a Demat Account?

• Risk-free: The convenience of a Demat Account is coupled with its inherent safety. It’s a perfect safe way to hold all your securities and protects your against loss of physical certs, forgery etc
• Time-saving: It’s an effective and time-saving way to buy/sell share immediately, automatic credit of shares when bonus or splits happen
• Zero paperwork: Every transaction is in electronic format so the demat is super-flexible when it comes to handling securities
• No hidden cost: All costs are known beforehand and handling expenses, stamp duty etc are eliminated
• With the demat account an investor can receive benefits like dividends, interest, refunds, bonuses etc directly into the account

Can one open Multiple Demat Accounts?

Yes, One can open multiple demat account or just trading accounts but only one account with one broker.

Any minimum balance requirements?

NO, demat account has no such requirements.

What are the conditions for opening multiple demat accounts?

• An individual can have only 1 account with 1 Broker. No multiple demat or trading accounts with same broker.
• Every Demat account will have its separate Annual Maintenance Charges (AMC)
• Unused Demat Accounts are likely to be frozen if dormant for a long time. To reactivate KYC procedures will be done again
• No need for multiple trading account with multiple demat accounts

Multiple Demat Accounts have a major benefit; one can separate their trading and investment portfolios. One can also get the services of various brokers and use them to their advantage.