All about Demat Account
A Demat account or dematerialized account converts the shares from the paper form into an electronic form. They are similar to pass books offered by the banks where you have opened an account. You can easily buy or sell shares of different companies using your Demat account. All the transactions are entered into it akin to the bank passbook.
How to open a Demat Account?
In order to open a Demat Account the interested candidate has to follow these general instructions:
- The interested candidate has to approach a Depository participant (DP) who is registered with the National Securities Depository Ltd. (NSDL) and
the Central Depository Services Ltd. (CSDL).The sole function of the DP is to act as an intermediary between the investor and the depository.
- Then the relationship manager from the DP that you have approached provides you with an application form that you need to fill and deposit with them. Some documents like identity and address proof are mandatory requirements and can’t be bargained with. The interested candidate needs to produce an original PAN card during the process of account opening.
Once the documentation is over, the DP who is basically a stock broking firm, bank, sub-broker etc. (e.g.INDIABULLS, ShareKhan, IIFL, ICICI etc.) demands a minimum cheque in your name in case you want to start with purchase of shares.DP purchases dematerialized shares in your name and saves them in your Demat Account and charges a minimum broking charge.
What are advantages of trading through a Demat Account?
- A Demat Account promises security in transactions, timely delivery of shares, reduced fraudulent transactions.
- As the paper use is limited in the process so costs associated are reduced greatly and the cost per transaction is also lowered than physical trading.
- The process has provided mobility and ease of working from anywhere.
- In addition investors can invest in IPO’s, ETF’s of gold and carry out trading at huge volumes that was not possible earlier.