Things you need to know before opening an Demat Account - Motilal Oswal
Things you need to know before opening an Demat Account - Motilal Oswal

Want to Open a Demat Account? Here's What You Should Know

A Demat account offers multiple benefits and that's why they are increasingly getting popular. An online Demat account is easy-to-access, secure, saves time, and has a catalogue of all your investments at one place.  Stock trading beginners may not know much about Demat accounts, but with frequent usage, they will get acquainted with all procedures. Consider a Demat account to be just like your bank account, with the principal difference being that instead of saving entries, it keeps details about stocks and securities. A Demat account allows electronic trading of stocks which is the preferred and most common trading method these days. In India, mainly two types of Demat accounts can be opened: NSDL Demat and CSDL Demat. Once you have all the requisite information, open online demat account and start trading without any hassles.

What is the difference between NSDL and CSDL?

National Securities Depository Ltd (NSDL) and the Central Depository Services Ltd ( CSDL) are two stock trading depositories linked to the two stock exchanges. NSDL is the depository for National Stock Exchange (NSE) while CSDL is the depository for BSE (Bombay Stock Exchange). While they are primarily linked to each stock exchange, when needed both the stock exchanges can use either of them for trading and securities settlement. The promoters of the two depositories are also different.

What's a Depository Participant?

A Depository participant is a bank or a brokerage firm registered with either CSDL or NSDL. You can check the list of the depository participants online and then select the ones that offer the most competitive services.

Mainly, brokerage firms are of two types: discount and service. The product offerings of discount brokerage firms are equity and derivatives. It engages in trade as per the customer's wish. Service brokers also offer other investor services like consultancy, advisory, mutual funds, insurance, IPOs etc. Before you proceed to open online demat account, be sure about the type of brokerage services you require.

How to select the right Depository Participant?

It's advised to first compile a list of all brokerage firms that offer services and then do basic research based on parameters like the services they provide, added benefits, its legacy and reputation, whether it suits your needs, their customer support etc. It's also important to check out the brokerage cost, if any and to find out if the trading system interface is smooth, seamless and without any lags. Look carefully for any hidden cost levied in case of a zero balance Demat accounts that ideally charge nothing for transactions. Also do a comparative analysis based on all the services offered and other charges like annual maintenance charge. Contact the DP and ask him about Demat account opening online.

How to open Demat account?

Demat account can be opened anytime by just following these 6 simple steps:

1. Get in touch with a depository participant (DP)

2. Submit the completed account opening form provided by the DP along with all the KYC (Know your Customer) details. A photocopy of PAN card, address proof and bank account details also need to be submitted to the depository participant.

3. DP initiates a verification process upon receiving all documents.

4. On the completion of the verification process, the depository participant opens the Demat account on applicant’s behalf.

5. Once the account is opened, all important details like DP ID, client ID, master client report, tariff sheet, and a copy of rights & obligations of beneficial owner and depository participant, will be provided to you.

6. DP will also provide Demat account login ID and password using which you can log into the account and start trading. It needs to be remembered that NSDL demat login details are highly confidential and should be kept with utmost safety.

Conclusion

By just following all the steps, doing basic research and knowing what your requirements are, opening a Demat account is a hassle-free process. Procedure of opening a demat account is as easy as it can get.Opening Demat account just requires a bit of information, finding the right DP and you are good to go.


Related Articles: How to Open a Demat Account Without a Broker | Factors to Keep in Mind While Opening a Demat account | Factors to Consider When Opening a Demat Account | 10 Points to Remember When Operating your Demat Account | Types Of Demat Account & Trading Account

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