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Lets start with learning what is a Dmat Account? DEMAT account, short for ‘dematerialized’ account, enables you to trade stocks and shares. This account is just like a bank account, the only difference being that stocks replace money, and all your shares are managed electronically with adjustments made automatically as and when you buy or sell shares. Also, akin to a bank passbook, your DP will provide you with periodic statements of your holdings and transactions.
With growth in technology, nobody wants physical shares anymore. Hence although the SEBI has permitted a limit of 500 shares in physical form, having a DEMAT account has become a must as almost all trades are settled in dematerialized form.
If you are wondering why a DEMAT account, well the same has many benefits attached to it:
- Reduces brokerage charges
- Pledging of shares is easier
- Enables quick ownership of securities on settlement resulting in increased liquidity
- Avoids confusion in the ownership title of securities
- Provides easy receipt of public issue allotments
- You avoid bad deliveries caused by signature mismatch, postal delays and loss of certificates in transit
- Eliminates risks associated with forgery, counterfeiting and loss due to fire, theft or mutilation
- Avoid stamp duty and filling up of transfer deeds
- Obtain quick receipt of benefits like stock splits and bonuses
Now that you know the advantages, if you are thinking of opening a DEMAT account, please note that it is extremely simple. All you need to do is contact your nearest Depository Participant (DP) [you may visit the NSDL and/or the CDSL website to acquaint yourself with your nearest DP]. Broadly speaking, opening a DEMAT account will involve the following:
- Filling an account opening form.
- Signing an agreement with the DP
- Submitting documents supporting the proof of your identity and address, which may be attested copies of your account details given by the bank, copy of work permit, copy of passport etc
As soon as the account becomes functional, you will receive a Beneficial Owner ID (BO ID) that will be unique and you are required to quote it in the event of further transactions. While buying shares, quote your BO ID and place your order for your desired share. The money will be taken from your NRE account and the shares will be credited in your DEMAT account by your DP. On the other hand, while selling shares, provide your DP with the required instruction, and your DEMAT account will get debited with the payment being made through broker/sub-broker/bank. Your DP will provide you with a periodic statement of your DEMAT account.
Please note that the charge for opening a DEMAT account varies with the DP. An average may be obtained from the NSDL and/or CDSL websites. A good website where you can find all the necessary details about opening up or registration of a demat can be found at: www.Demat-Account.com