Demat Account: Introduction, Charges, Documents Required

demat account

Stock trading is popular among retail investors these days. The data shows that more and more individuals are indulging in investing and trading in the stock market. As per the SBI report, more than 44.7 lakh retail investors have participated in the stock market from April to June this year. And NSE data shows that retail investors have moved up from 39% since Mar 2020 to 45% in 2021. 

The reasons for such surge include: 

  • Declined interest rates on saving avenues.
  • Significant increase in global liquidity with the FII inflows in FY21 valued at $36.18 billion.
  • Easily accessible stock market through low brokerage demat account and trading account. 
  • Growth in the market capitalization in the Indian stock market. The BSE Sensex market cap increased by 1.8 times.

So a demat account is the entry pass to take advantage of stock market opportunities to make good returns. Simply, the demat trading meaning is online trading. Without a demat account, you can not make any buy/sell transaction in the stock market. Here is the blog explaining the fundamental concepts of the demat account. 

Demat Account: Introduction

Dematerialised account, abbreviated as a demat account, is an online account available with registered agents of national depositories – the NSDL and the CDSL. These registered agents are named depository participants (DPs). 

Demat Account is a record book that records all the securities you own. A demat account is one of the mandatory accounts for online trading. Its main functions are as follows: 

  • This ensures the safety of the financial assets a demat account holder holds.
  • It facilitates the quick transfer of shares. 
  • This provides dematerialisation facility – converting securities format from physical to electronic and rematerialization – converting securities from electronic to physical form.
  • It facilitates receiving the benefits from corporate actions like stock split, rights, refunds, bonus issues. 
  • And others.

Demat Account Charges 

Demat accounts facilitate investors with several benefits. To provide beneficial demat services, DPs levy the following charges: 

1. Transaction Charges 

When you invest in securities, these get credited to your online demat account, and when you sell them, these get debited from your demat account. For such debit/credit transactions, your DPs charge from investors. Most DPs charge for debit transactions only.

2. Account Opening Charges 

If you are positional traders intended to hold the stocks for a longer-term, you can open a basic demat account for free. You can have securities worth less than Rs.50,000 in a basic demat account. If you want to invest in more securities, you can ask for demat account opening charges from your DP. 

3. Custodian Fee 

Your DP takes care of your demat securities and keeps them safe. For their services, they charge a custodian or safety fee. If a company has already paid this custodian fee, the DP will not levy a safety fee on investors. 

4. Demat/Remat Fee 

It is the fee to complete the process of converting the format of your securities, i.e., from paper-based to electronic or vice versa.

5. Pledge creation Fee 

If you are a day trader or trade in the F&O segment, you need to create a margin pledge to collateralize your demat securities to obtain funds through the margin trading facility. Pledging/Unpledging of demat securities attracts a fee. 

Documents Required to Open a Demat Account 

Demat account is easily accessible with a registered depository participant. If you are looking for a demat and trading account simultaneously, you can connect with a SEBI and exchange registered stockbroker. You need to submit the following documents to open a demat and trading account:  

  • PAN card of the applicant 
  • Income Proof 
  • ID proof 
  • Address Proof 
  • A canceled cheque 
  • Passport size photo 
  • e-Signature 

Upload these documents when you fill the online form at the DPs/broker’s official website. 

With the details mentioned above, you can easily understand a demat account’s working system and open a demat account.

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