Demat (Dematerialization) : Why, What and How ?

 

Demat (Dematerialization) account was made mandatory by SEBI (Securities and Exchange Board of India) around 1996 to enable trading of shares. Earlier, share prices were announced by traders and stock exchange transactions were registered on paper after closing market. 

What is Demat ?

The process of converting physical share certificate to electronic form is called as Dematerialization. Demat lets you possess the assets in electronic form and trade with them digitally. Demat account can be used to invest in bonds, mutual funds, Exchange Traded Funds, government securities and IPO. Dmat account is with a central depository like the National Securities Depository Ltd (NSDL) or the Central Depository Services Ltd (CSDL). These depositories appoint agents called Depository Participants (DP). Zerodha and Upstox, Angel , Sharekhan, 5Paisa, and Motilal Oswal, SBICAP Securities Demat Account, ICICI Direct Demat Account etc 

How to open a Demat account? 

1. Select Depository Participant 
2. Fill the account opening form 
3. Comply with KYC (Know Your Customer) requirements 
4. Finish the verification process 
5. Get an account number/ID 

Documents required for opening a Demat account 

• Proof of identity (Aadhaar Card/Passport/ Driver’s License) 
• Proof of address (Ration card/Passport/Rent Agreement/Recent Electricity/ Telephone Bills) 
• Income proof (Income Tax Return/Salary Slip) 
• PAN Card 
• Photograph 

How to use Demat account?

Demat account is linked with trading account and trading account is linked with a bank account. Trading account helps to trade while Demat account acts as repository to store these traded shares. Funds need to be transferred from bank account to trading account. Order can be placed using trading account. Shares get transferred to Demat account after order gets executed. 

Opening Demat account on Zerodha-

https://support.zerodha.com/category/account-opening/online-account-opening/online-account-opening-process/articles/how-do-i-open-an-account-online

Opening Demat account on Zerodha (Video Tutorial) - 

https://www.youtube.com/watch?v=iYDw_9SinE4 

Opening Demat account on Upstox-

https://upstox.com/trading-account/

DISCLAIMER 

The information is generic in nature and is meant for educational purpose only.