Those who want to do share trading should open a Demat Account. It is essentially an online account where you can dematerialise or convert your physical certificates into electronic form. This Account works like your savings account, in which you can hold, withdraw, and deposit the share market instruments with ease. It also facilitates electronic trading. These accounts are offered by depository participants who could be either banks or other financial companies.
Since the Demat Accounts are essential for investment trades, here are some common FAQs regarding the same.
What securities can I hold in my Demat Account?
You can hold an array of equity market securities in your Demat Account. These include shares, mutual funds, Government bonds, exchange-traded funds, money market instruments, and other such securities.
What are the benefits of opening the Account?
There are plenty of benefits of opening a Demat Account, and of them, the most important one is you can transfer your physical shares into electronic form. This way, you need not worry about losing the documents. Moreover, the trading account facilitates the digital settlement of trading.
What is a depository? How are they different from depository partners?
Depositories are like banks. They hold your securities digitally. The depository participant, on the other hand, serves as an agent of the depository. The two primary depositories are National Securities Depositories Limited and Central Depository Services Limited. Such firms offer both trading and Demat Accounts.
Can you open Demat directly with the depository?
No, it is not. NSDL and CDSL do not offer Demat and trading account services. You can only open the account through a depository participant.
How to open a Demat Account?
There are two ways to open an account. Firstly, visit the office of your chosen DP and submit the relevant documents like PAN card and other address and ID proofs. You can open the account online as well by filling a form and submitting the scanned copies listed.
Can I open a joint Demat Account?
Yes, you can. But the DP decides the number of account holders for every account. Generally, you can have a single primary holder with two joint holders.
Can I assign a nominee to my Demat Account?
Yes. SEBI’s guidelines state that filing nomination is imperative for all Demat Accounts. If you choose not to assign a nominee, you should provide a declaration mentioning the same.
Can I open multiple Demat Accounts?
Yes, you can. Multiple accounts are accessible but with different DPs. Even documents should be additional and must comply with the KYC for each account you open.
