With the implementation of the Depositories Act 1966, the conventional physical trading of securities like shares was replaced to be dematerialized and was made electronic. This meant you'd require a Demat account to hold any security.
Let's look into what a Demat account is and how to create one.
Dematerialized account or Demat account allows you to hold securities and shares electronically. This makes the whole management and the trading process hassle-free and quick. According to a mandate by SEBI in 1966, you must have a Demat account to invest in the stock market.
To open a Demat account, follow the given steps:
Selecting DP - DP (Depository Participant) are the depository agents. Only two depositories, National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL), in India are registered. These are institutions that store your securities in a Demat form. You can select a DP based on location, customer support services, Demat charges, and so on.
Submit Documents - To open a Demat account, documents required are PAN Card, ID proof, Aadhar Card, and residence proof. Finally, submit the self-attested copy of the above-mentioned documents.
Sign Agreement With DP - You also need to submit the DP agreement with your necessary documents. The agreement contains obligations and responsibilities which you need to adhere to as an account holder.
Filing of Nomination and Demat Opening Form - At the very beginning itself, you need to fill up a nomination form. This is so that your securities are delivered to your beneficiary on your untimely demise.
Verification Stage - Once your documents are submitted, your selected DP will then verify them and forward them to the compliance department. When it is approved by them as well, your Demat account is finally open. You'll then receive a BO-ID (Beneficial Ownership Identification Number) from your DP.
Signing Power of Attorney (POA) - Although as an investor this stage is not necessary, signing the POA with your DP as a trader is mandatory. Your broker is empowered by this to debit from your account if you sell any security.
Opening Demat Account Via Aadhar Card - You can also open a Demat account online via Aadhar Card verification. To do so, your bank account must be linked with your Aadhar. You must also use the Aadhar registered mobile number to open your Demat account. For verification, you'll be sent an OTP to the phone number you submitted. With this mode of opening a Demat account, documents required are only canceled cheque and PAN Card. The in-person authentication will be done via conference call or by visiting the nearest customer branch of the chosen DP. Your Demat account is activated once both verification steps are completed.
The process for Demat account login is convenient. Make sure you have the DP ID, POA number, and BO-ID. After the opening of a Demat account, login ID and password will be provided to you by your DP.
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