Basic Rules You Need To Know About Opening Demat Accounts

by Pankhudi Dave Head Finance Manager

If you wish to create a corpus, you need to start investing at a young age. You must diversify your investments by putting your funds in a wide range of instruments; be it shares, mutual funds, and government bonds, gold and so on. One of the best ways to create a corpus at a much rapid rate is through market trading. But before you can trade, you need to familiarize yourself with every aspect of the trading world, which includes the instruments or mediums through which trades are conducted. Yes, you need to know Demat account meaning and the basic rules of opening these accounts. They are as under

What is demat account?

In order to start trading in the market, you need a special account through which you can conduct your trades. These accounts are provided by depository participants (DPs) such as banks, brokerage firms and other such financial institutions and are known as dematerialisation or Demat accounts. You can hold all your securities in electronic form in this account. You can easily enter the details of all the securities you own once the DP allots you your Demat number.

The basic benefit of opening one of these accounts is that you can view all your share market holdings; be it shares, mutual funds, government bonds, money market instruments etc., on one uniform platform and easily conduct your trades through it. Moreover, you do not have to worry about misplacing or losing your share certificates since all your investments are securely stored in this dematerialised form.

Basic rules of opening the account

In order to open this account, you need to be aware of the basic rules. They are as under

You can open the account by visiting the DPs office: Demat accounts may be opened by visiting the office or the Depository Participant. You need your basic documents such as ID and address proof and your PAN and Aadhaar Number details to open this account.

You can also open the account online: You can also easily open your account through online channels provided by the DPs i.e. through their official website by submitting scanned copies of your documents.

KYC compliance is necessary: Completing the KYC (Know Your Customer) compliance is mandatory in order for you to start trading through the Demat account.

Account holders: You may open the account as a single account holder or open a joint account. You can also name more than 2 people as account holders, but you should check the maximum number of people who may be listed as account holders by consulting your DP.

Accounts for minors: This account may also be opened for individuals under the age of 18 years i.e. minors. However, the account can only be opened if a parent/guardian is appointed as a joint account holder. The parent/guardian must conduct transactions on behalf of the minor, until the minor account turns into a regular account.

Name changing: You are not allowed to change the name of the account holder once you have opened the account. If there are any mistakes, you can close the account and open another one, with a new name and correct details.

Multiple accounts: There is no restriction on the number of Demat accounts you can open. The accounts may be opened with the same DP or with different DPs.

All demat account holders are charged a basic transaction fee when you first your account. DPs also levy an annual account maintenance fee. Also, you must pay a small fee each time you dematerialise or rematerialize the securities held in the Demat portfolio.