A Detailed View on Demat Account Opening
Demat account, which is actually an abbreviated form of “Dematerialised account is for holding shares and securities electronically. For anybody willing to start investing in share markets demat account opening is the most important step to get rolling. According to SEBI (Securities & Exchange Board of India) it is mandatory for an investor to have a demat account if he wants to trade in securities listed any of the Indian Stock Exchanges. Now with the arrival of the online broking portals online demat account opening is also possible but for a new investor understanding the role of a depository or a depository participant is also important. There are two depositories in India - Central Depository Services (India) Limited (CDSL) and National Securities Depository Limited (NSDL), but a demat account cannot be opened directly with the depositories. Investors can open an account only with a depository participant – an authorized agent for offering depository services. Investors can always choose a DP as per their choice and also depending upon the quality of service offered by them. Moreover, there is also no restriction on the number of account that a single investor can have and joint demat account opening is also possible. There can be a maximum number of three holders in a joint account with one of them as the main holder and two as joint holders. For online stock and equity trading demat account opening is a must for every investor. The process of opening an account can be divided in two steps • Finding a depository participant and • Having all required and relevant documents arranged and ready for submission. A depository participant is always required to be authorized and registered with the SEBI for offering depository services and actually acts as an intermediary between the investors and the depositories like CDSL or NSDL. For online demat account opening finding a participant is not much difficult as banks, other financial institutions and also many brokers are authorized by SEBI for providing depository services. Though banks often recommend DPs of their choice but investors are also free to find a DP of their own. For demat account opening apart from submitting a properly filled up account opening form investors are also required to submit a number of required documents and these requirements may also vary from one DP to another. Some of the required documents for opening an account in India are – PAN card and Voter ID card, IT return, Passport, address verification proof and also a few others. At the time of online demat account opening investors are required to show their original PAN card and also sign an agreement with the participant in a format prescribed by the depository. After going through the steps investors are issued with an account number which is also known as Beneficiary Owner Identification number or BO ID. As a matter of fact apart from having a demat account investors are also required to have a bank account and also a trading account with a broker for online stocks and share trading.