Demat Accounts are ‘Deep Pockets, that don’t need space’ – Remember we are Social Distancing!
Why limit your patent leather purse to physical Cash?
Instead, if you are offered, a Safe Space that can hold all your Investments…. your existing Shares or proposed IPOs, Bonds, Mutual Funds, SIPs, Government Securities… (you name it!)…in Electronic form… Securely held night and day …and ABRACADABRA! … an account that Opens and Closes at your command…why say no?
Remember, you don’t need any of these investments to start with, but you could just open a Zero-Balance Account. Go ahead and make a wise beginning now! Open your Dmat Account today, that’s paperless.
Understanding the process is ONLY 7 Clicks Away!
- Just as your cash balances are safely held in Bank Accounts, so too your Investments or Assets require a Depository (NSDL or CSDL) with whom Demat Accounts are opened. An accredited link called a Depository Participant or DP (usually a Bank or a Broker), helps you in the Demat Account Opening process by connecting you to the Depository that you choose, and simplifies the process.
- Demat Account Opening entails complying with ‘Know Your Customer’ requirements (KYC). This is the Strongest Link in the security system aiding Demat Account opening. So, make sure to keep handy at least :
- 1 acceptable Proof of Photo Identity (Passport, Aadhar card, Voter Id)* and
- 1 Proof of Address or Residence (Passport, Aadhar card, Utility Bills, Tax receipt etc.)*.
to complete this important milestone. Self-certified photocopies of these need to be submitted with the ‘Demat Account Opening form’ to the DP These documents would need verification with the originals.. As settlements involve exchange of money, your Bank Account details (incl. IFSC code) need to be recorded, within this form. Just as in Bank Accounts, photographs of account holder become part of the form, as well.
- A DP Agreement is signed between the customer and the DP, containing a set of rules and obligations agreed to by both the parties and serves as the key to compliance with the SEBI laid norms, that need strict adherence to. When this is done, the documents are verified and an electronic account is set up by the DP in the name of the customer. At this stage, a unique Demat Account number (BO ID) is generated and this serves as the identity for the electronic address, where all your future investments would be credited, thereafter.
- The Demat Account is the mandated vehicle or repository, securely holding the assets that a Trading Account later uses, in order to fulfil settlements that emerge from Trading with counterparties. Simply put, when money is used to buy digital assets, Cash moves out from your normal Bank Account(Savings, Current Accounts etc.) as its payment and the newly acquired Asset gets credited to your Demat account. For this process to happen smoothly, a Trading Account is necessary, as a pathway. Merely opening a Demat Account, is akin to opening a Savings Bank Account with a Bank, without owning a cheque book or a withdrawal slip, to transact from it! The Trading Account fulfils this function and ideally, upon Demat account being opened, a Trading Account in the books of a Broker is advisable.
- Opening a Trading Account requires the Investor to empower the DP/Broker with suitable powers to take care of the day-to-day transactions in the share trading account (such as paying out your assets when sold, crediting sale value to your Bank account, crediting purchased assets to your Demat account etc.) Signing a Power of Attorney (POA) favouring the DP/Broker facilitates automatic movement of assets and cash and is well worth the effort. In the absence of a POA, debits in the Demat account will need issuance of physical DIS (Delivery Instruction Slips akin to cheque leaves) in a timebound manner, by you. Failure or rejection in such cases results in costly auction of shares, leading to potentially, high cost to you.
With the high fluidity of ‘App’ based trading and its popularity, Investment Portals are highly attractive in offering Automated Trade Flows, where Sale/Purchase/Cut Loss/Take profit levels can be automated by you, for a Good Night’s sleep!
- Digital Demat Account Opening has many advantages eg. in reducing human interaction. While the Demat market mechanics do not change as compared to the physical documentation, verification of identity and residence is established through a e-verification process of Aadhar as the key document. This clearly has an USP in current times of Covid control.
- Some Small but Vital details that you must keep in mind are :
- The cost of maintaining Demat and Trading Accounts, which vary across DPs and also depend upon the frequency/volume and quantum of trade, in the accounts. This should be a major concern in your selection of DP/Broker.
- The need to ensure registering a Nomination within the Demat account, in the presence of which, handing over of account’s holdings to successors would be simplified, when necessary.
Opening a Demat account is a total win-win solution to You, if you are an active Investor. Your Depository Participant (DP/Broker) can then put you on fast-track to opening your own Trading Account, with 24 x 7 access. This can open up a host of other complementary services such as getting access to Daily Market Research by way of cues and trading suggestions, aid in Tracking your Investment Portfolio through a Safe & Trusted App and other value adds at competitive rates!
If you haven’t opened a Demat Account yet, life always offers you a second chance.. It’s called Tomorrow.