Demat Account is a prerequisite for trading online as it stores the shares you buy in a digital format. Opening a Demat Account is primary to commence your stock market investment journey. Demat Account offers you plenty of benefits and makes the trading process smooth and safe.
Here are the 9 things on Demat Account that every investor must know:
What is Demat Account?
A Demat Account, also known as Dematerialized Account is an online repository that stores financial instruments, such as shares, mutual fund units, bonds, Exchange Traded Funds (ETF), etc. in a digital format.
What is depository?
Depository is the entity that holds the several financial instruments, such as, shares, bonds, mutual funds, etc. in digital mode. The shares you view in your demat account are held with the depository. In India there are 2 depositories – NSDL (National Securities Depository Limited) and CDSL (Central Depository Services Limited). The agents of depositories are called Depository Participants (DP) which provides the facility of opening Demat Account to investors.
Benefits of Demat Account
- Eliminates paperwork: You don’t need to keep physical documents of your investments as everything is stored digitally in your Demat Account. It’s convenient and hassle-free.
- Safe and Secure: Being a digital storage medium, you don’t need to worry about the risks associated with physical documents, like loss of the paper, tampering, theft, etc.
- All investment at one place: It’s a major benefit of Demat Account that you can store and view all your investments in shares, bonds, mutual funds etc. at one place. You can stay better organized with your investments.
- Bonus shares, stock splits get automatically updated in your Demat Account: If you are holding shares of a company that announces bonus shares or stock split, it will automatically get updated in your Demat Account.
Additional Read: How to open Demat Account online
How to open Demat Account
Opening Demat Account is as easy as ABC. Today, the process of opening a Demat Account is 100% digitized, and you can complete it within 15 minutes without stepping out of your home. Bajaj Financial Securities offers 100% paperless account opening with an option to open a free* account with zero Account Maintenance Charge (AMC) in the first year. Check out the steps to open Demat & Trading Account with BFSL:
Open the Account Opening Form
- Enter your basic details like Name, PAN Number, email, Phone number etc.
- Enter your address and bank details
- Choose a subscription that suits you the best.
- Upload KYC documents for your proof of address and proof of identity
- Complete an In-Person Verification by recording a short video of yourself
- Sign the form digitally through OTP sent on your Aadhar registered mobile no.
- Preview your application and Final Submit
- Once the account is opened, you will receive your credentials along with the Demat Account number.
Types of Brokerage
Before you choose a stockbroker to start trading, you should enquire the type of brokerage charged. Brokerage is the fee charged for the services rendered by the broker. There are basically two types of brokers – Full-Service Brokers and Discount brokers. Full-service brokers are one which charge brokerage as a per cent of trade transaction value. This is because they provide additional services, such as – research and advisory. The other category is discount broking, where the basic services of demat and trading account is provided. They generally do not offer research or advisory, as a result of which they charge a flat fee per order irrespective of trade volume.
Types of charges
There are various charges associated with Demat Account. Before you open a Demat Account you should get acquainted with the charges that apply:
- Demat Account opening charge – It is the charge associated with opening Demat Account. Some stockbrokers waive off the account opening fee
- Demat Annual Maintenance charge – It is the recurring cost associated with the maintenance of Demat Account by the stockbroker
- Dematerialization charge – It is the charge associated with converting a physical share in to digital mode
- Off Market Transfer charge – If you want to transfer shares from one demat account to other, it attracts off-market transfer charges
You open a Demat Account with an intention to invest in Stock Market, so you must look at the trading platform of the stockbroker. Check the features provided on the trading platform. If you trade in Futures and Option or Intraday, look for advanced trading platforms that provide various features to suit your need. Also check the various types of orders that you can place. Also, some traders are more comfortable trading on the app, while some on the web. Check if your preferences are met.
Documents to open Demat Account
The documents needed to open your Demat & Trading Account with BFSL are as below:
- Identity Proof: PAN Card
- Address Proof (Anyone): Passport, driving licence, voter ID, Aadhaar card with masked Aadhar number or last 3-month bank statement
- Wet Signature on white paper
- Bank details- Cancelled cheque, bank statement with IFSC code and bank account no.
Additional Read: Trading Account Vs Demat Account
How to use a Demat Account?
The shares that you see in your Demat Account are actually stored with a Depository. The depository is an entity that stores all the shares in electronic format. NSDL and CDSL are the two depositories in India.
Stock Brokers are like the agents of these depositories providing investors the option to open Demat accounts. Stock Brokers are also referred to as the Depository Participants (DP). They act as a link between the investor and the Depositories.
While some stock brokers give you the option to open only demat account, others provide Demat and Trading account together. At Bajaj Financial Securities we provide you both demat and trading account. A share bought via trading account gets credited into your Demat Account after T+2 days, where T is the day on which the buy order got executed. You can hold the share in your Demat Account for as long as you want. You can sell the share in your demat account anytime by placing a sell order through your trading account.
*Account opening is free for Freedom Pack, with zero Annual Maintenance Charge (AMC) for 1st year & Rs. 365+GST from the 2nd year.
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