The first thing a person wants to invest in or trade in the stock market is he needs to open a Demat account. So in this post let me write the basics of the Demat account opening procedure in India. The first question that comes to our mind is whether this account is mandatory to open if anyone wants to trade or invest. Yes, it is mandatory to open a Demat a/c if anyone wants to trade or invest in the stock market.
In historical times, physical shares were being traded when people used to handle shares in paper form. Still, this physical share transfer happens on today’s date, but the ratio of the same is very less compared to today’s online share trading. Nowadays, once the Demat account opening procedure in India is introduced, practically 99.99% of all the delivery trades are done through Demat a/c only.
What Is a Demat Account?
It is simply paperless trading. Whenever a trader or an investor buys a share and becomes a shareholder of that company, he has a share in this company. He has ownership of some units of the company that he has purchased. To prove his ownership he should have a certificate that he is the shareholder of the company. So previously companies used to issue physical share certificates in paper form. The investor had to keep it safe so that they do not get destroyed.
Then came the concept of Demat a/c. Demat a/c is the same as a bank account. The basic difference between it with a bank account is that in a bank account transaction of money takes place whereas in a Demat account shares are transacted. So an investor or a trader can transfer shares from the Demat a/c and also receive shares in the Demat a/c.
Now, what is the Demat account opening procedure in India?
It has many options, but first, let’s understand the structure. The Securities and Exchange Board of India or SEBI is the biggest organization that regulates the market. SEBI has given approval to two depositories. This is like the same as they have given approval to exchanges like NSE, BSE, or MCX. These two depositories are NSDL and CDSL. The full form of NSDL is National Securities Depository Limited and that of CDSL is Central Depository Services (India) Ltd.
As there are many trading members and brokers under every exchange, similarly there are many depository participants under these depositories. They are the same as brokers. Many organizations can become depository participants or DP. It can be a broker or a bank or an institution. These DPs will register with any of the two depositories and once they are registered as a DP, they can start opening a Demat account of the traders and the investors. The opening of a Demat a/c is the same as we go to a bank and open a bank a/c there.
So we have learned that traders and investors can open their Demat account of DP account with only SEBI registered DPs who are registered with either of the two, NSDL or CDSL. Most of the banks work as DP in India. Apart from that major broker in India also gives the facility to open Demat a/c. So the opening of a DP a/c is not at all a complicated job, rather almost any bank or any stockbroker can open it for you. And the documentation for the Demat account opening procedure in India is also the same as for Bank account opening. You need to provide your photo, PAN card, identity proof, and address proof.
Whether it is mandatory to open a Demat a/c if one wants to invest in the share market?
Yes, it is mandatory and the investor should not think of skipping the Demat process. DMAT has only pros, there are no cons to it. It is mandatory because when you are buying a share it will come to your account and when you will sell it, it will move out of your account. The transaction of funds involved in this process will be done through your bank account. But the transaction of shares will definitely require a Demat account. So, we can say, anyone who wants to start investing in the share market must need a Demat account. He will not be able to invest in the share market without a Demat.
When will the shares reflect in the Demat account?
Suppose, you have purchased the share today in your trading account. The broker will automatically deduct the margins from your trading account and associated funds. Next to the next day of the purchase after the pay-in and pay-out are complete between the selling broker and the purchasing broker, the shares will be delivered to the purchasing broker and it will reflect in your account. Nowadays all the major brokers provide the facility to see the Demat account status online to their clients, the same as banks give online facilities. You just log in and you can at once understand whether you received the share or not. If you don’t see your shares after 2 days of the purchase you need simply to contact your broker. So generally it 2 days to receive the shares after the transaction. This is popularly known as T+2 or TRANSACTION+2 in share market terminology.
Case Study: Demat account opening procedure in India with a popular broker, Zerodha:
- First, visit this page and put your name, phone number, and email id in the form.
- Once you register your details there, you will receive a phone call from their sales staff. He/she will assist you in the Demat account opening.
- Else you can proceed and open the Zerodha account with an Aadhar card instantly.
- Alternatively, take the printout of the account opening forms.
- If you want to open only the Trading and Demat a/c, just print the TD form. If you want to open the commodity account as well as print the C form also.
- Sign on the first holder’s place, wherever you can see an F, like F1, F2, etc.
- Attach photographs and attach documents – Pan card (Xerox), Aadhar card (both sides Xerox), 6 months’ bank statement (Xerox), 1 canceled cheque, another cheque to pay a/c opening fees, and 2 photographs needed. Don’t forget to self-attest all Xerox copies.
- Courier the forms and documents to the following address – Zerodha, 153/154, Opp Clarence School, J P Nagar 4th Phase, Dollars Colony, Bangalore – 560078.
- Generally, the Trading / Demat a/c opens within 3 days after they receive your form.
FAQs on Demat Account Opening
The process of opening a demat account typically involves submitting documents like correct address proof, identity proof, and PAN card details. After that, you need to fill up an application form. Then submit it with KYC (know your customer) documents to start the activation process of the demat account.
To open a Demat account in India, you will need valid documents such as PAN Card, Aadhaar Card, or Voter ID Card for KYC (Know Your Customer Process). Additionally, there may be other requirements based on individual brokers’ terms & conditions.
Yes! You can get a digital/paperless trading experience with almost immediate access if all the required documents for KYC verification are in order. Depending upon the bank or broker’s policy certain procedures can take some time but generally, this entire process has been made convenient due to technological advances available today!
Generally speaking, most brokers do not require any upfront capital commitment when opening Demats accounts. This means they don’t demand any kind of initial investment while opening these accounts as savings banks do. But, depending on the stockbroker’s policies and charges applicable minimal amount needs to be maintained at all times inside these Accounts.
Conclusion
This concludes our discussion on the Demat account opening procedure in India. We learned that this is a mandatory process before we start trading and investing in the stock markets. I will love to answer your queries in the comment section below this post.
