Please wait..
  • Home
  • Demat
  • What Is Dematerialisation & How To Open A Demat Account
6.13

What Is Dematerialisation & How To Open A Demat Account

Have you seen a ‘share certificate’? Chances are that you haven’t. Why? Because today, most investors have their holdings in ‘demat’ or electronic form.

What is Dematerialisation of Shares?

Demat stands for dematerialisation. Dematerialisation is the process of converting physical financial instruments such as share certificates, mutual fund investments, and bonds into electronic form. An Investor who needs to dematerialise his shares needs to open a demat account with Depository Participant. This physical shares are then surrendered by the investor and in return he gets electronic shares in his demat account.

A demat account is similar to a bank account. When you receive your bank statement, you will see 2 columns – deposits and withdrawals of money and balance money in the account on the last day of the statement. Similarly, a demat statement will show the investments you have bought, sold and the balance investments held on the last day of the statement.

Now you may wonder – where do I open a demat account? That’s easy. When you want to buy equity shares, you approach your bank or an equity share broker. The broker will open the demat account for you along with the brokerage account. When you buy and sell securities, the broker will have the securities deposited into or moved out of the linked demat account. You will also need to link your bank account to the brokerage account for transfer of funds when you buy and sell shares, and for payment of related costs.

If the broker is a depository participant (who is authorized to open and maintain demat accounts), the broker will open your demat account and maintain it in-house. However, if the broker is not a DP, your demat account will be opened with a DP the brokerage house is associated with.

ADVANTAGES OF DEMATERIALISATION

You may ask – but why has demat been introduced? To answer your question, take a look at the benefits arising from demat:

  1. Holding your investments in demat form is easy and convenient.
  2. You don’t have to face the problem of losing investment certificates or receiving forged certificates.
  3. Transferring securities becomes easy.
  4. You incur lower costs associated with transactions when compared to physical buying and selling of securities.
  5. You receive bonus shares and share splits automatically.

Learn How to Open a Demat Account

 

 

How to Open a Demat Account

  1. Fill Form: Fill in an account opening form for broking service and for opening demat account.
  2. Sign DP Agreement: Sign a DP agreement and Power of Attorney permitting the DP to transfer shares in and out of your account when you buy and sell.
  3. KYC Requirements: Complete the KYC requirements for which you need to provide your identity and address proof and cancelled cheque of your bank account which you want to link to your broking and demat account.
  4. Once the account is opened, the DP will give you a client id (very similar to a bank account number).

Learn How to Open a Demat Account

Demat account charges

You may ask – is it expensive to have a demat account? The answer is a clear – no. To clarify, take a look at the costs associated with a demat account:

  • Fees towards dematerialization and rematerialisation (converting electronic form back to physical form) of securities ranging between Rs 10 to Rs 40 per request form.
  • Annual maintenance fee: This is charged by the DP to maintain your demat account and can range between Rs 300 to Rs 500 annually.
  • Transactions fees on every purchase and sale is 0.04% of the value of the transaction or minimum range between Rs. 10 to Rs 20 per instruction, whichever is higher for securities.

As an investor, there are only reasons to cheer. Demat accounts are a hassle free, easy and safe way to transact and hold securities.

Now a days share broking firm have started providing 3 in 1 share trading account, which gives you the functionality of a savings, trading and Demat account, all integrated into one.

Share on FacebookTweet about this on TwitterShare on LinkedIn
  
Previous Article Next Article
Back to top

What are you looking for?

x

Log In To Personalise Your Page

Log in with Username

Forgot password?

Log in with another account

x
x

Query Form

I agree with the Terms & Conditions.

x

SUBSCRIBE

x