If you want to trade equities, commodities, or currencies, you’ll first need a demat account. Also known as dematerialized account, it is in this account that the credit and debit of securities take place. Read this post to know the 5 steps that can help you open a demat account.
Now that you’ve finally decided that you want to trade stocks, the next step is to get yourself a demat account. Also known as dematerialized account, it is the account in which the stocks or securities you buy are credited in an electronic format. When you want to sell those securities, they are deducted from this account.
If you don’t know how you can open a demat account, here are the detailed steps that you need to follow-
- Selecting a DP
A DP or Depository Participant can be a brokerage firm, bank, or a financial institution. This DP is the link between you and the depository. When you place a buy or sell order, it is the responsibility of the DP to execute your order. The DP can be registered with NSDL (National Securities Depository Limited)or CDSL (Central Depository Services Limited).
You can check the website of NSDL and CDSL to go through the list of all the registered DPs. Make sure that you only select a licensed DP.
- Account Opening Form and Documentation
Once you have selected a DP, the next step is to fill the account opening form. Most of the DPs now let you fill and submit the form online. However, there are a few documents that require physical signatures. You’ll have to take print out of those forms, sign them, and send to the DP.
Along with the account opening form, you’ll also be required to submit a few documents. This generally includes attested ID proof and address proof.
- Filling the DP Agreement
You will also be required to sign the DP agreement to open a demat account. This agreement will have all the details of the DP, their rights, duties, and more. Make sure that you read this agreement thoroughly before signing. Along with the agreement, you will also receive a schedule of charges.
This will have details like brokerage for trading, annual fee for account maintenance, market segments in which you can trade, and other essential details.
- Allocation of Beneficiary ID
After successful submission of all the documents and verification by the DP, you will receive a beneficiary ID or demat account number. The demat account number will include the DP ID which is a unique ID given to every DP.
You will use this beneficiary ID or demat account number for all your transactions.
- Trading Account, ID and Password
The last step of how to open demat account is getting yourself a trading account. Along with the demat account, you will also get a trading account. It is in this trading account that all your funds would be stored. If you want to buy shares, money will be debited from this trading account, and the purchased shares would be deposited in your demat account. As most stockbrokers now have online trading platforms, you will also receive an account ID and password for online trading.
Opening a demat account is now easy and quick. As long as you have the right documents, it should not take more than a few days for the DP to open a new account for you. When selecting a DP, ensure that you select one that has reasonable brokerage and offers features like online trading platform, mobile trading app, trade signals, latest market news, and has an excellent market reputation.