Introduction to Demat account
Dematerialisation or Demat account changed the landscape of share trading in India. Prior to Dematerialisation, shares were physically traded and settled. The entire physical handling of stocks was costly, tedious, and time consuming, with a 14-day settlement cycle. Additionally, physical shares heightened the risk of loss, theft, and duplicity of share certificates. To eliminate these hassles and to accelerate the growth of online share trading, Demat accounts were introduced in the year 1996. Today, Demat accounts are mandatory to trade or invest in the Indian stock markets.
What is Demat account?
A Demat account is an electronic account which stores your financial securities or assets in digital form. A common misconception among investors is that Demat accounts are only for stocks. However, this is not true. You can hold diverse assets like equity shares, preference shares, debentures, bonds, mutual funds, exchange traded funds, insurance policies, and IPO (Initial Public Offering) etc. in a Demat account.
Demat accounts in India are maintained by national depositories -
- National Securities Depository Limited (NSDL)
- Central Depository Services Limited (CDSL)
While maintained with depositories, you cannot directly open a Demat account with NSDL and CDSL. Investors can open Demat accounts with depository participants i.e., brokers who act as a connecting link between depositories and investors.
How does Demat account work?
Demat account, trading account, and bank account all work in unison to facilitate seamless transactions. For instance, when you buy stocks, you first need to transfer money from your bank account to your trading account. Once the order is successfully executed, stocks are credited to your Demat account whereas funds are debited from your trading account. On the other hand, when you sell stocks, shares are debited from your Demat account and money is credited to your trading account. All this happens in T(Transaction) + 2 working days.
Different types of Demat accounts
Depository participants in India typically provide three types of Demat accounts.
Regular Demat accounts– Resident Indian citizens with domestic bank accounts can opt for regular Demat accounts.
Repatriable Demat accounts– This Demat account is specifically for Non Resident Individuals with Repatriable, Non Resident External (NRE) bank account, allowing for easy transfer of funds overseas.
Non-Repatriable Demat accounts– With a Non Repatriable Demat account, you cannot transfer money overseas. A Non Resident Ordinary bank account is necessary to open a Non Repatriable Demat account.
Documents required to open Demat account
With the advent of technology, the process of opening a Demat account has become extremely easy and convenient. Here are the documents required to open a Demat account with m.Stock:
- Pan Card
- Proof of Residency: Aadhaar, driving licence, registered lease agreements, power bills, passports, copies of insurance policies, rent receipts, landline phone bills, gas receipts etc.
- Pay slips or tax slips as evidence of income (for activating Futures & Options segment)
- Bank account statement or passbook
- Signature and photograph
How to open Demat account with m.Stock
- Visit www.mstock.com
- Click on ‘Open an Account’ button
- Enter your mobile number
- Enter your KYC details
- Verify information like with address proof, ID proof, date of birth and PAN number
- Make the account opening payment. It is recommended to open a Rs 999 Zero Brokerage account, which allows you to trade across products for life at zero brokerage.
- Add your bank account and complete your profile.
- You will receive login credentials within 24 working hours, and you can start trading!
Demat accounts have reduced the costs associated with share trading like transfer fees, courier, and stamp duty charges etc. But investors are still unable to reap their full potential as they end up paying high brokerages in the long term in lieu of zero upfront account opening fees. This is where m.Stock Demat account shines. With a one-time fee of Rs 999, you can enjoy zero brokerage across products for life. So, open a m.Stock Demat account and benefit from zero brokerage across products for life.