Updated On May 15, 2024

By SaraNextGen

Explained in Detail - The Demat Account

What is a Demat Account? Demat Account is like a bank account except Demat holds the stocks in electronic form. A bank account holds money and a Demat account holds financial certificates of instrume...

• What is a Demat Account?

• Demat Account is like a bank account except Demat holds the stocks in electronic form. A bank account holds money and a Demat account holds financial certificates of instruments like bonds, shares, government securities, mutual funds, and exchange-traded funds.

• How to open a Demat account?

• The fastest and quickest way is to select a brokerage firm and opt for Online Account opening. This is paperless mostly and does not take more than 10 minutes if all documents are ready.

• This, however, was not always the case and before the advent of internet and camera phones it was not that easy. The steps for opening the Demat account are,

• Select depository participant (DP)

• Fill account opening form

• Submit documents for verification

• Sign a standardized agreement with DP

• Verification of Documents

• Demat Account number and ID generation

• What are the advantages of a Demat Account?

• Risk-free: The convenience of a Demat Account is coupled with its inherent safety. It’s a perfect safe way to hold all your securities and protects your against loss of physical certs, forgery etc

• Time-saving: It’s an effective and time-saving way to buy/sell share immediately, automatic credit of shares when bonus or splits happen

• Zero paperwork: Every transaction is in electronic format so the demat is super-flexible when it comes to handling securities

• No hidden cost: All costs are known beforehand and handling expenses, stamp duty etc are eliminated

• With the demat account an investor can receive benefits like dividends, interest, refunds, bonuses etc directly into the account

• Can one open Multiple Demat Accounts?

• Yes, One can open multiple demat account or just trading accounts but only one account with one broker.

• Any minimum balance requirements?

• NO, demat account has no such requirements.

• What are the conditions for opening multiple demat accounts?

• An individual can have only 1 account with 1 Broker. No multiple demat or trading accounts with same broker.

• Every Demat account will have its separate Annual Maintenance Charges (AMC)

• Unused Demat Accounts are likely to be frozen if dormant for a long time. To reactivate KYC procedures will be done again

• No need for multiple trading account with multiple demat accounts

• Multiple Demat Accounts have a major benefit; one can separate their trading and investment portfolios. One can also get the services of various brokers and use them to their advantage.