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What is a Demat Account?
Demat is an abbreviation form of dematerialization, it allows investors to hold securities in an electronic form in place of physical form. With the help of demat account trading, investing and monitoring of securities are made easier and convenient.
As per SEBI to trade in stock market it is mandatory to hold a demat account. When an investor trades, it holds shares and securities in an electronic form. When securities are purchased or sold it gets reflected in the account. The account gets opened with NSDL (National Securities Depository Limited) or CDSL (Central Depository Services Limited) through a Depository Participant (DP). For trading in share market all you require is:
- Bank Account
- Demat Account
- Trading Account
Demat account functions the same way as a bank account when shares are purchased money gets deducted and vice versa. The purpose of dematerialization is to eliminate the risk of holding physical share certificate.
It is essential to hold a demat account because of the following reasons:
- Safety is the main concern as holding physical forms was challenging because there were chances of getting damaged, misplaced but this has been removed with the help of demat account as securities are kept in electronic form.
- To trade in the share market it is important to hold demat account, without which investors cannot experience trade.
- Demat account is convenient and takes less time to buy and sell securities online.
- Also, investors can have a corporate advantage like bonus issue; stock split, etc. which are directly updated in the account.
Varieties of investments like equity shares, exchange traded fund, mutual funds, bonds, etc. are held in demat account. The account can be opened without possessing any shares and with zero balance in the account.
How Demat Account works?
Parties involved in demat account transaction:
- There are two depositories in India
- National Securities Depository Limited (NSDL), it operates under NSE
- Central Depository Services Limited (CDSL), it functions under BSE
- Depository participant
- Authorized stock broking firm
- Financial institution
- Clearing houses which take care of debiting and crediting shares
- National Securities Clearing Corporation Ltd (NSCCL) under NSE
- Indian Clearing Corporation Ltd (ICCL) under BSE
- Stock exchange
When shares are bought, the broker credits it to investor’s demat account and they are reflected in the holding statement. If an investor is trading online, he/she can view their holdings online whereas the broker credits the share on T+2 (Trading day+ 2 days).
When shares are sold, the investor needs to give delivery instruction note to the broker where details of stock sold are filled. The account is debited with the shares and the investors are paid money for the shares being sold. But, if you are trading online, the account will automatically reflect the shares sold and amount credited to the account.
Is an organization that provides financial services, holds securities in electronic format and assists trading. One of its primary functions is to transfer the ownership of shares from one investor to another. The National Securities Depositories Limited (NSDL) and the Central Depository Services Limited (CDSL) are the two depositories in India.
Depository Participants (DPs)
Are registered intermediaries between the investors and the depositories. DPs provide access to the central depositories, offer demat services and facilitates trading platform. Karvy Stock Broking is one such depository participant offering demat services and much more.
Each demat account has a unique identification number (unique Id). Trades take place only when such unique Ids are provided. Once you open demat account, you will receive a unique id. This unique Id helps us coordinate with the exchange, depository and companies to identify your account to debit/credit shares based on your trade requests.
Continue reading to know how to open demat account online.
Features of Demat Account
Trades are easily accessible; investors can buy and sell securities at anytime and anywhere
Easy dematerialization of securities as conversion of physical certificates to electronic and vice versa can be easily be done on the instruction to the Depository Participant (DP)
Transfer of shares have become easy with the help of demat account as earlier it used to take one month or so
Less cost incurred with simplified process as no stamp duty required on transfer of securities in electronic form
Liquidity of shares as it has made easier, faster and simpler to get money on selling of securities
With demat account, holder can avail for a loan against securities
Account holders can freeze their accounts or specific quantity of securities for a certain period of time
Globalizing India, as it is a platform where foreign investors can easily access Indian stock market and rise in the foreign money can ultimately result in growth of overall Indian economy
Account holders can avail corporate actions
Benefits of Demat Account
Easy Access and monitoring
Demat accounts are completely online, implying it can be easily accessed online from anywhere at any time. It also facilitates easy monitoring of the holdings.
Demat accounts have a two-factor authentication (2FA) and are safer than physical shareholding which includes the risk of theft, loss or damage.
Trading of physical shared involved additional costs of stamp duty, handling charges, etc. which are not applicable for demat accounts.
Since all procedures are electronic, they are less time-consuming and more convenient. One can easily buy, sell and transfer funds and securities with just a few clicks.
Bonus issues, right shares, or stock split offered by companies are automatically updated in the demat accounts and dividends, refunds, or interest are also directly available to the demat account holder.
Demat account organizes all securities in one place as it is not just for shares, it can also hold other securities and investments.
ADVANTAGES OF DEMAT ACCOUNT
OPENING WITH KARVY ONLINE
Karvy Stock Broking, the broking arm of Karvy Group, has a rich experience of over 20 years in the industry. One can look forward to open Demat account with us to avail the following benefits of demat account:
Cutting-edge technology and platforms to support trade through browsers, desktop application and mobile application.
Best of class research in form of Daily, Weekly, Monthly and Quarterly reports in addition to seasonal and thematic reports.
Award-winning performance and customer services
One of top 10 Broking Houses in India
One of the largest Retail Brokers with a presence in 1,100+ locations
10 Lakh Broking customers and 25,000+ daily trading clients
Advisory and Support Desk services for assisted trading
Extended research expert assistance in query resolution
Fill an account opening form and as per requirement carry the following list of documents:
- PAN card
- Aadhaar card
- Canceled personalized cheque (or more than 3 months of bank statement)
- Passport size photograph
You will receive a copy of the rules and regulations, the terms of the agreement and the necessary charges that you need to pay
Once the form is filed; a representative will be assigned for in person verification where original documents have to be shown. The medium of in-person verification is Whatsapp or Skype call
After the account is processed you will receive an account number/ client ID, which will be required to access demat account online
You can now buy and sell securities using the demat account credentials
Karvy has come up with a special benefit of opening online demat and trading account at absolutely free of cost in 15 minutes. Karvy online account provides you 360 degree online investment solutions across all asset classes with lowest brokerage across the market.
+How and where can I check my Demat Account Holdings?
+What documents are required to open a Demat Account?
To open a demat account with us online you need a mobile linked aadhaar card, active mobile number, pan card, digital signature, canceled personalized cheque and access to the internet.
+If I have forgotten my password, what should I do?
You can easily reset your password by submitting your Client Code/User ID, Email address and PAN number on our mobile app, NEST application or https://trade.karvyonline.com/KARVY/Trade/ForgotPassword.jsp.
+What are the charges for opening Demat Account?
+How to operate my online Demat account?
You can operate your demat account using our mobile app, NEST application or https://trade.karvyonline.com/KARVY/Login/indexauth.jsp. To understand our trading platforms betterbook a demo now .
+What are the major objectives of a Demat account?
The main objective of a demat account is to safely keep all securities in one place and facilitate easy trade and transfer of the same.
+What if I already have a Demat account with another depository participant?
You can open a trading account with us and link it to your existing demat account with other depository participants. Alternately, you can open a new trading and demat account with us, transfer your securities and funds to the new account and close the older account.
+Things to check before Opening Demat Account
Before opening a demat account one should always check the brokerage charges, annual maintenance charges, any other charges if applicable, available technology and trading platforms and other supporting value-added features and customer services.
+Various Types of Demat Account
At Karvy, we offer customized solutions to meet every investor’s unique requirements. You can opt for only demat or only trading account, demat and trading account with access to trading equity, commodity, currencies, mutual funds and other exchange-traded securities.
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