Beginner's guide to Demat Account

Account that converts the shares from the paper form into an electronic form is called as dematerialized account Demat account 

Updated: Mar 14, 2016, 02:16 AM IST
 Beginner's guide to Demat Account

Zee Media Bureau

Account that converts the shares from the paper form into an electronic form is called as dematerialized account Demat account.These accounts are almost similar to pass books offered by the banks where you have opened an account. Using the Demat account you can easily buy or sell shares of different companies using your Demat account. All the transactions are entered into it just like it's done in the bank passbook.

Opening a Demat Account

In order to open a Demat Account one 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) andthe 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.

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.