How Do You Open a Demat Account Without a Broker?

If you wish to trade or invest in the Indian financial markets, having an active demat account is mandatory. Without the account, you cannot purchase or sell any security over exchanges like the National Stock Exchange (NSE) or the Bombay Stock Exchange (BSE).

Generally, most beginner investors tend to approach a stockbroker to open a demat account, who also opens a trading account along with it. Although this practice is commonplace, not many know that you can open a demat account without a broker.

Wondering how it is possible? Here’s a comprehensive guide that can help give you some clarity. But before that, let’s quickly go through the concept of a demat account.

What is a Demat Account?

A demat account is a special account used to electronically store securities like debentures, equity shares, mutual fund units and bonds, among others. When you purchase a security through the exchange, your demat account is credited with the requisite number of units you purchase. Similarly, when you sell your security, your account is debited by the requisite number of units you sold.

Is a Broker Necessary to Open a Demat Account?

Now that you’ve understood what a demat account is, let’s look at whether you can open a demat account without a broker.

Currently, there are two entities that are licensed to offer demat accounts in India - the Central Depository Services Limited (CDSL) and the National Securities Depository Limited (NSDL). These two entities are known as depositories.

However, you cannot directly open a demat account with a depository. Instead, you will have to initiate the demat account opening process through another entity known as the depository participant (DP).

The DP is essentially an intermediary between you and the depository. Most licensed stockbrokers in India are also depository participants. So, when investors want to open a demat account, they invariably end up approaching a stockbroker.

That said, there are quite a few DPs that are not stockbrokers. These entities only offer demat account opening services. If you wish to only open a demat account and not a trading account, you can approach these non-stockbroking depository participants.

You can find the entire list of depository participants and the depository they’re affiliated with by visiting the website of the Securities and Exchange Board of India (SEBI). Alternatively, you can also find the information on the National Stock Exchange (NSE) or the Bombay Stock Exchange (BSE) website.

How Do You Open a Demat Account Without a Broker?

Now that you know you can open a demat account without a broker, here’s a quick look at the step-by-step process you need to follow to open one.

• Step 1: Select the Depository Participant

  Choosing your depository participant is the first step of the demat account opening process. Selecting the right DP is crucial since the entity is going to be an intermediary between you and the depository. Go through the list of depository participants available on the SEBI’s website and select the ones offering good customer support. Then, filter the options by comparing them with one another. Remember to also consider the fees and charges levied by the DP when making a decision.

• Step 2: Fill Out the Demat Account Opening Form

  Once you’ve chosen the depository participant, the next step is to fill out the demat account opening form. When filling out the form, make sure to specify all the relevant and mandatory details. This will ensure that the account opening process goes on smoothly without any hassles.

• Step 3: Attach All the Necessary Documents

  You need to provide certain documentary evidence as part of the demat account opening process. These documents are part of the Know Your Customer (KYC) process and are mandatory. When attaching photocopies of the relevant documents to your filled-out demat account opening form, make sure to self-attest them with your signature.

• Step 4: Submit the Filled Application Along with the Documents

  Once all the documents are attached, simply submit the application form with your depository participant. Your demat account will be opened once your application verification process is complete.

Documents Required For Opening a Demat Account

When opening a demat account, you need to submit the following list of documents to your depository participant.

• PAN Card
• Proof of Identity - Aadhaar, Passport, Driving License or Voter’s ID
• Proof of Address - Passport, Aadhaar, Voter’s ID or Driving License
• Proof of Bank Account - bank account passbook or latest bank statements
• Proof of Income - Latest salary slips or Income Tax Return (ITR)

Conclusion

With this, it is clear that you can open a demat account without a broker. That said, it is advisable to open an account with a stockbroker since it will also allow you to get access to a trading account. A trading account is an electronic account that facilitates the purchase and sale of securities on an exchange. Having both trading and demat accounts lets you do a lot more than just having the demat account alone.