Just like you need a savings bank account for depositing funds, you need a Demat account for depositing stocks and other securities. The Demat account will hold your shares in an electronic format. Read this post to know the exact steps for opening a Demat account in India.
In the past, stock market investors used to receive physical shares in the form of paper certificates in India. But in 1996, the Depository Act introduced the depository system for converting physical shares into dematerialised electronic form. Now in order to purchase stocks and hold them in your account, you need to have a Demat account.
If you want to invest in the stock market, the first thing you need now is a Demat account. But what are the steps for opening a Demat account in India? They are as follows-
- Contact a DP
To open a Demat account, you need to contact a DP or Depository Participant. The DP works as the link between you and the central stock depository, namely NSDL and CDSL. You need to open an account with a DP by filling the account opening form.
You can visit the official website of NSDL and CDSL to check the list of registered DPs in India. You can select any DP from this list and visit their website to fill the account opening form.
- Submit Documents
You will also be required to submit copies of your ID proof, address proof, etc. along with your account opening application. This can either be done online or offline. There are now several DPs in India that offer online account opening facility.
You can also visit the nearest branch of your DP to submit the application form and other documents.
- Sign the DP Agreement
Once the documents are submitted, you will have to sign a DP agreement. Make sure that you carefully go through the agreement as it has detailed information about your rights, duties, and fee charged by the DP.
A copy of this agreement will be provided to you. Ensure that you keep this agreement safely as you might need it in the future.
- Receiving BO ID
Once all of the formalities to open Demat account are completed, the DP will provide you with a Demat account number or Beneficial Owner Identification Number (BO ID).
Every time you purchase a security, it will be deposited into this account. When you sell the same, it will be debited from this account.
Important Points to Know About Demat Accounts
A lot of people often confuse a Demat account with a trading account even though they are two different types of accounts. As a matter of fact, you can have a different DP and stockbroker. It is not necessary to open a Demat account from your stockbroker. However, it is generally convenient to have the same stockbroker and DP.
If you are looking for a stockbroker to open a Demat and trading account, select one that is reputed and offers a top-class trading platform. For on-the-go trading, there should also be an official mobile app of the broker. The online portal of the broker should provide the latest market-related news and trading tips to help you begin your trading/investing journey.