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Is it Necessary to Have a Demat Account for Online Trading

A demat account is an account that is an electronic store for securities held in electronic format. If you want to make use of an online trading app, and buy and sell shares online, you have to hold a demat account. Maintained by NSDL and CDSL, national depository organizations in India, these accounts hold your shares like a bank account stores your cash. When you want to trade in shares or hold them on a delivery basis, you need to have a demat account for online stock trading. However, you do not need to have a demat account if you wish to trade in futures and options. For this, you only need to have a trading account as settlements of these are undertaken in cash. 

  • Opening a Demat Account

The decision to open a demat account is largely based on what you are trading in online. People typically open a demat account with a bank (where they have a bank account). Most banks have the facility of opening a demat account when your goal is to buy and sell shares online. A demat account automatically holds the shares you buy and this kind of trade online requires a demat account of the person conducting the trade. You can open a demat account at any bank branch, and this will be an online demat account. Banks act as brokers to open your demat account, but non-banking financial companies like Motilal Oswal also have the facility of opening demat accounts, linked with your bank account. 

  • How to Open a Demat Account

Your bank is a broker for opening a demat account online, and it's easy to open an account. You can go through the following steps:

  1. You can go to the website of the bank and click on the tab that says ‘Open Demat Account’.
  2. If you already hold a bank account, you will have to fill in a form with your details. To open a demat account for online stock trading like buying and selling shares, you will have to fill in separate KYC details too.
  3. Your details to be submitted will be your Aadhaar and PAN Card numbers, and these act as address and identity proof. 
  4. Once you fill in your details, you can proceed through a menu-driven process and press ‘submit’ at the end. 

Typically, it takes around a week to 14 days for the demat account to be activated. You can also open an online demat account at your bank branch. You will get a demat account number (beneficiary ID) which is a 16-digit number. 

In Conclusion

If you are buying and selling shares on a regular basis, you must have a demat account, easily applied for and opened at Motilal Oswal. 

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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