The Finance : Demat Account
A demat or ‘dematerialised’ account holds shares in electronic form, thus saving you the bother of holding shares in paper form. Possessing a demat account is now a prerequisite for stock market investments.
You can open demat account in banks, financial institutions and stock broking houses. The broking houses in such cases also act as DPs (depository participants) intermediating between the depositories and the investor. To open a demat account, first of all you have to submit an application to a DP and along with it submit required documents. Once you have a demat account to your name, you can open a trading account with a broker of your choice.
The shares bought and sold by you are reflected in your demat account. Any previously held physical share can also be dematerialized and transferred to the account.
The DP, at regular intervals, provides you with an account statement showing the balance of shares in your demat account and transactions during a period.
Following steps can help you open a demat account:
First of all you have to look for the institutions offering DP services. You have two options. Either you choose a bank/financial institution or a stock broker who could provide you the DP services as well. The factors that help you in the selection should be the charges and location convenience. The fees charged for DP services differ across the industry. Though the rates change, the charges normally categorized under the following heads:
Account opening fee
Annual maintenance fee
Transaction fee
Besides the above, depository participants also charge service tax as applicable. A bank or other DP might sometimes waive the initial account opening fees. It is better to choose a bank where you have been holding your savings account for long, then much of the paper work would get simpler and documentation will not take much time, as you are already known to the banker.
The Documents required opening a demat account:
A set of documents needed to be provided to the agent at the time of opening account are:
1. Duly completed account opening form and passport size photos;
2. A copy of PAN card as proof of identity;
3. Personalized cheque/Copy of the bank passbook
4. A copyof passport/voter ID/ ration card as a proof of address