Everything you want to know about Demat Account

Friday, 21 April 2017

Are you interested in trading and investing? Then you must have a demat account. It is a primary requirement to begin your investment journey. Demat account have changed the stock market scenario. In the era of internet, demat accounts was a revolution. Here is everything you want to know about demat accounts.

History

In 1996, a step was taken to free the stock market of physical share certificates. Back then, shares were sold in physical form. If you wanted to buy a share, you paid cash to the trader and got a certificate. Imagine the amount of paper each investor had! Encashing these stocks was also time-consuming. The dematerialization policy aimed to convert the physical certificates into electronic form and simplify the process.

What is a Demat account?

Just like a bank account holds money, a Demat account holds shares, mutual funds, bonds, government securities and electronic traded funds (ETFs). Every time you buy a share, it is credited to your Demat account and vice versa. It is mandatory for every investor to have a Demat account.

Role of a Depository

India has two depositories: NSDL and CDSL. They hold the details of all the Demat accounts in India in electronic formats. You can open a Demat account with any of the two depositories. They facilitate the buying and selling of securities.

Role of a Depository Participant (DP)

Once you have finalised a depository, you can open a Demat account with any of its DPs. A DP is a like a retailer. For example, you want to buy a Nestlé’s Maggi or Cadbury’s Dairy Milk. You will not visit the office of Nestle or Cadbury. You can buy these products from a local supermarket or grocery store. Similarly, you can open an account to be able to transact in securities with a DP. It could be an NBFC or broker or a bank. SAS Online is a reputed DP that facilitates online transactions in the stock market.

How to open a Demat account?

  1. Select a DP: Choose the one offer good services. You can also select a DP that offers online services like SAS Online by visiting their site sasonline.in.
  2. Application: Submit a duly filled Demat account opening form along with copies of KYC documents. These include PAN Card, proof of address, proof of identity, and bank account details.
  3. Documentation: On submitting all the documents you receive a copy of rules and regulations and the charges you would incur. A copy of the terms of the agreement is also submitted.
  4. Verification: A personnel from DP will visit you in person or call you to verify all the information furnished to them.
  5. Account number: On successful completion of the verification, you will get a unique account number and ID from the DP.

You can now operate your Demat account online. You are liable to pay an annual maintenance fee and a transaction fee.

Benefits of Demat account

  • Your shares are secured as high-level of data privacy standards are followed.
  • You can invest in shares anytime anywhere.
  • Electronic settlements are faster.
  • No risk of theft, loss, non-delivery of certificates.
  • You can buy and sell as less as one share.
  • In one account you can transact in shares as well as debt instruments.
  • Physical securities incurred an extra cost of stamp duty. Demat account saves that cost.
  • Easy to maintain and track.

The de-materialization policy has proved to be a boon for all investors. Will all these benefits and ease of transactions, investing has become easier for beginners too.

Read more about opening a Demat and Trading account procedure. If you want to open Demat account with SAS Online you can click here.


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