Everything you need to know about Demat Account

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A demat account is used for holding securities in an electronic format, after they are purchased. This account helps in eliminating the risk of forgery, theft, and loss or damage of physical certificates. Moreover, it includes all the investments an individual makes in exchange traded funds, shares, government securities, mutual funds, and bonds. This account is provided by two depositories- NSDL and CDSL. Besides, here are the few important things you need to know about this account:

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·        How does dematerialization process take place?  The process of dematerialization involves the following steps:

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  1. Investors submit physical share certificates along with the demat request form to the depository participant.

  2. The depository is intimated of the request by the depository participant; the certificates are submitted to the issuer company’s registrar.

  3. Afterwards, the dematerialization request is confirmed by the registrar.

  4. Registrar then updates the account after dematerialization and informs the depository about the completion of the process.

  5. Thereafter, depository updates the account and the information is passed on to the depository participant.

  6. The investor’s demat account is updated by the depository participant.

     

·         What is the procedure of opening a demat account? Here are the steps involved in demat account opening:

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  1. Select a depository participant. DPs can be brokers, banks or an online investment platform. 
  2. Submit your KYC documents. You need to submit the form given to you for opening an account along with the KYC form, PAN card, passport size photographs, photocopied documents, and your PAN card.
  3. Appear for an in-person verification. This is carried out by a person from the DP’s firm in order to ensure that the details provided by you in the form are authentic.
  4. Once your application has been processed, afterwards you will be a given a Beneficiary Owner Identity – a unique account number, which can be used during future transactions and to access your account. 

 

·         What are the features of a dematerialized account? 

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  1. Helps in easy transfer of shares: In order to buy or sell shares, investors can transfer their holdings through a recipient instruction slip or delivery instruction slip. The slip helps user to provide all the details that are needed for a smooth transaction.

  2. Freezing of account: Account holders can freeze their account for a certain period of time, if required. In fact, this option is beneficial for those who wants to prevent unexpected debit or credit in to one’s demat account. Moreover, this option is available only for a particular quantity of securities held in the account. 

  3. Faster dematerialization of securities: This is quite simple. To convert the physical form to an electronic form, account holders can provide instructions to their depository participant. Similarly, electronic securities can be reconverted to physical form when required.

  4. Provides corporate benefits and actions: If the company offers interest, dividends, or refunds to their investors, all these benefits are automatically available to the demat account holders. Besides, right shares, stock split or bonus issues are also updated in the account of all the shareholders. 

  5. Less time consuming: The National Securities Depository Limited (NSDL) let users to send instruction slips electronically rather than physically submitting the slip to the depository participant. Therefore, this makes the procedure quite convenient. 

·         What are the benefits of opening a dematerialized account?

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There are various benefits associated with opening a new demat account account. Some of them are as follows:

  1. It eliminates the risks involved in physical certificates, such as theft, loss, damage of certificates, and forgery.
  2. It reduces the brokerage charges.
  3. Also, traders don’t need to visit the share market again and again, as they can easily operate from anywhere because the system has become electronic.
  4. There is no kind of paperwork. Therefore, it has greatly reduced the time required to clear each transaction.
  5. All transactions are done through the depository participant. Thus, the need of communication with each and every company in which the trader holds securities is completely eliminated.
  6. Stocks that arise out of consolidations, mergers, and splitting are directly credited in to the account.
  7. Moreover, the brokers don’t have to face forgery or delivery problems.

Besides, for those who wants to start trading online, open a demat account with Upstox!

 

 

 

 

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