Retail participation in the stock markets is on the rise. An increasing number of individual traders and investors are venturing into the markets to gain from the price movements in the assets listed on the exchanges. If you’ve been contemplating this too, then the first step you need to take towards becoming an active market participant is to open a demat account. Now, the demat account opening procedure is fairly simple, but if you’re a beginner with absolutely no idea about how to get started, it may probably be a good idea to begin at the basics and get to know all that you need to know about what a demat account is and how you need to go about opening one.
One way to do this is to look at an informative report of demat accounts, which could give you some insights about this financial product. You could also look for a report on the procedure of opening a demat account. But why go to those lengths of trouble when you can simply get to know everything you need to right here?
If you’re planning to open a demat account, here’s everything you need to know about the demat account opening procedure, the documents needed, and the steps involved. In other words, here’s our very own informative report of demat accounts for beginners.
What is a demat account?
A demat account is essentially an account that you hold with a depository, much like how you hold a bank account with a bank. Demat is short for dematerialization. These accounts are known by this name, since they are used to hold the dematerialized version of your shares and securities. To open a demat account with a depository, you need to approach a depository participant (DP). DPs are basically intermediaries who connect retail traders like you with the depositories in the country, like NSDL and CDSL.
What is the demat account opening procedure?
Broadly speaking, the procedure for opening a demat account is mostly the same, no matter which depository participant you choose to open your account with.
Let’s take you through the steps involved.
Step 1: Choose a depository participant
A DP can be a broker, an authorized bank, or a financial institution. Generally, most traders tend to opt for DPs who also double as stockbrokers, so they can access both categories of services under the same banner. Some DPs are registered with the NSDL, while others are registered with the CDSL. Before you decide on a depository participant, you need to look at various factors like the brokerage they charge, the leverage they offer, and the value added services they provide.
Step 2: Take care of the paperwork
Once you’ve chosen a depository participant, the next step is to take care of the documentation. In this report on the procedure of opening a demat account, that’s what we’re going to look into next. Generally, you’ll need to fill out an account opening form and a KYC form. Along with these forms, you will most likely be required to submit the copies of the following documents.
– Your PAN card
– A proof of identity (passport, Aadhaar card, driving license, etc.)
– A proof of address (ration card, passport, utility bills, rental agreement, etc.)
– A proof of income (salary slip or income tax return)
– A passport-sized photograph of yourself
Most DPs follow this up with an in-person verification (IPV) to confirm the authenticity of the information provided.
Step 3: Receive and read through the rules and regulations
After you’ve submitted the paperwork necessary and completed the verification process, your depository participant will generally provide you a copy of the rules and regulations associated with your demat account. Make sure you read through these clauses thoroughly, and if you’re having some trouble understanding bits of it, it’s a good idea to seek out some professional help, so you know exactly what is involved before you sign the dotted line.
Step 4: Access and operate your account
Following approval of your application, your demat account opening procedure comes to a close. Your DP will give you the credentials you need to log into your account. You can use the ID and password to open and operate your demat account as you need.
So, that brings this informative report of demat account opening to a close. You’ll see that it’s a fairly simple procedure, and once you’ve completed it, trading in the markets becomes easier. With many DPs making the transition to extensively digitized solutions, you can now open a demat account online, right from the comfort of your home or from the convenience of your smartphone. Do make sure that whatever channel you opt for, your paperwork is in order. This way, the process gets over much faster, so you can start trading in the stock markets sooner than later.