How to open a demat account?
by Khalid Ahmad Finance ConsultantWe have written many articles providing
details about dematerialization of securities, advantages of holding shares in
demat or electronic form and how to manage your
investment in demat mode.
The below write-up will elaborate more on how
to open a demat account, the importance of nomination, how to convert your
physical shares into demat and other facilities offered by a demat account.
Opening
a demat account
Step
1: To
open a demat account; you have to approach a depository participant (DP), an
agent of depository, and fill up an account opening form. The list of DPs is
available in the websites of depositories: CDSL (Central Depository Services (India) Ltd and NSDL (National Securities
Depository Ltd).
Step
2: Along
with the account opening form, you must enclose photocopies of some documents
for proof of identity and proof of address.
Step
3: You
will have to sign an agreement with DP in the depository prescribed standard
format, which gives details of rights and duties of investor and DP. You are
entitled to receive a copy of the agreement and schedule of charges for future
reference.
Step
4: The
DP will then open an account and give you the demat account number. This is
also called beneficial owner identification number (BO ID). All your purchases
/ investments in securities will be credited to this account. If you sell your
securities, your demat account will be debited.
You can have multiple
demat accounts if you so wish. You can choose your DP as per
your convenience and there is no compulsion to open DP account with your stock
broker.
Points
to remember
Update credit
score your bank account details (bank account number, IFSC code) and postal address etc
of your demat account as and when there is a change, as you will receive direct
credit of refunds, dividends, interest & redemption payment and corporate
correspondences like annual reports notice of AGMs etc. as per the details
mentioned in your demat account.
Demat
account charges-
·
Investors
are required to pay the charges towards:
·
Dematerialisation
and rematerialisation of your securities
·
Annual
account maintenance
·
Transactions
fees (only for sell transactions)
·
The
charges of DPs are available in comparable structure on the websites of the
depositories.
Things
to note
·
The
DP may revise the charges by giving 30 days notice in advance.
·
If demat account is
closed in
between of the year, annual maintenance charges shall be levied proportionately
for each quarter.
·
There
is no minimum number of shares that have to be kept in the demat account.
·
No
charge is applicable for closure of DP account.
·
No
charge for transfer of holdings from one DP to another DP, if investor is not
satisfied with the services of your existing DP.
Nomination
·
Nomination
smoothens the process of transmission of your securities to your heirs, upon
demise. For physical shares, you have to avail nomination separately for each
company in which you hold shares / debentures. Whereas, by availing nomination
for your demat account, all your investments in that account is covered under
that nomination.
How
to demat your shares?
·
To
demat your physical certificates, you should approach the DP and submit the
following documents:
·
Dematerialization
Request Form (DRF)
·
Physical
certificates by marking “Surrendered for Dematerialization”
·
Separate
DRF has to be filled for each ISIN.
Process of dematerialisation:
·
Surrender
your physical certificates to your DP for dematerialisation.
·
The
DP intimates your request to the depository through the system.
·
The
DP submits the certificates to the registrar and share transfer agent (RSTA) of
the company.
·
In
case of any objection or in case of additional documents (if any), the RSTA
informs you directly. RSTA confirms the dematerialisation request from
depository.
·
After
dematerialising the certificates, RSTA updates the accounts and informs
depository regarding completion of dematerialisation.
·
Depository
updates its accounts and informs the DP.
·
The
DP then updates your demat account by
crediting the
shares.
·
Before
approaching your DP for demating your shares, you can check the list of shares
and debentures that can be dematerialised from the websites of CDSL and NSDL.
·
To
convert physical certificates into demat mode, the name in the share
certificate should match with the name of the demat account holder.
In case of joint holding, the name should be
in the same order both in the physical certificate as well as in the demat
account. However, you can request to change the order of the names of the joint
holders in the share certificate by submitting a Transposition cum Demat Form.
Example: You may have a demat account in the
sequence of, ‘A’ & ‘B’, whereas the share certificate may be in the
sequence of ‘B’ & ‘A’. In this case, you can lodge the security CIBIL
certificates for dematerialisation in the same account by filling Transposition
cum Demat Form to effect change in the order of names and to dematerialise the
securities as well.
Depository websites have a list of shares in
demat form. Investor cannot demat the shares of vanishing companies or shares
of the companies which are not in list of depositories.
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Created on May 22nd 2019 11:40. Viewed 742 times.