To open a demat account, the investor needs to open a demat account with a Depository Participant registered with SEBI. To open an account, the investor needs to fill up the account opening form, submit copies of SEBI approved documents as proof of identity, proof of address and original PAN card at the time of opening the account. All applicants should bring original documents for verification. The DP also provides a copy of the contract and schedule of charges to the investors. After processing the account opening documents, the DP will provide the account number (Client ID) to the applicant. Once the applicant’s account is opened with the DP, the applicant becomes a client also known as BO (Beneficiary Owner) and the account number allotted to him/her is called BO-ID (Beneficiary Owner Identification Number).

Demat services are currently offered by broking houses, as well as many financial and banking institutions. An entity providing depository services is known as a depository participant. Depository participant by definition is an intermediary between NSDL and/or CSDL, and the investor.

Included fee

To open a demat account, you have to pay certain charges. This fee is divided into major items:

annual maintenance fee

custodian fee

transaction fee

Annual Maintenance Fee

As we have seen above that AMC means Annual Maintenance Charge. You must have understood from the name that you have to pay some money every year to the bank for the convenience of your ATM Card. But the Annual Maintenance Charge is different for each bank’s ATM card. Because every bank takes its own charges.

Custodian Fee

A custodian bank, or simply custodian, is a specialized financial institution responsible for safeguarding the financial assets of a firm or individual and is not engaged in “”traditional commercial or consumer/retail banking” such as mortgage or personal loans, branch

banking, personal accounts, Automated Teller Machines (ATMs) and so forth. The role of a guardian in such a case would be to:

Holding in assets/securities of domestic and foreign like precious metals and safekeeping in the form of shares, bonds, commodities in the form of currency (cash)

– Arrangement of settlement of any purchase and sale and delivery in/out of such securities and currency

– (dividends in case of shares/equities and coupons (interest payments) in case of bonds) to collect information about and income from such assets and related tax withholding documents and administration for foreign tax reform

Voluntary and involuntary corporate actions of administration on securities conducted in the form of share dividends, share splits, business combinations (mergers), tender offers, bond calls, etc.

provide information on securities and their issuers, such as the Annual General Meeting and related proxies.

Transaction Fee

This fee is charged on the debt securities and account on a monthly basis. While some DPs charge a flat fee per transaction, others add a fee to the transaction value, subject to a minimum amount. Fees also vary depending on the type of transaction (buy or sell). In addition, the DP also charges for conversion of shares from physical to electronic form or vice-versa. The charges may be different for both Demat and Remat requests. For demat, some DPs charge a one-time fee along with a variable fee per certificate, while others charge only a variable fee.

Where Should One Start?

The first step is to open an account with the DP. Most of the broking houses, as well as many financial and banking institutions provide depository services and hence are also known as depository participants. It is not necessary to have a DP with your broker, but many brokers encourage their clients by offering to open a demat account with their DP

Transfer of Shares Between Depository Participants

Transfer of shares is possible, you have to fill the Delivery Instruction Slip Book (DIS) and give it to your DP, to transfer your shares from one DP account to another.. However, you have to check whether both the demat accounts are in the same order. Whether the Depository Participant is one or not (CDSL or NSDL) If they are different, then you will get an Inter Depository Slip (Inter DIS). If they are both the same, then you will need an Intra Depository Slip.

Try submitting that DIS when the market is open. Accordingly, the date of submission of DIS and the date of execution of DIS may be the same although a difference of one day is also acceptable. For transfer, you have to pay some fee to the broker as well.

Benefits of a Demat Account

The technological advancements made over the years have brought a lot of benefits to having a demat account:

1. Merchants can transact as per their convenience, making it convenient and time-saving.
2. No cumbersome paperwork is required to register a transaction.
3. There is no risk of theft, delay, or fraud of physical copies of share certificates, bonds, etc. as the securities are stored in electronic form.
4. You have a unified platform to hold debt as well as equity instruments.
5. Automatic credits are registered in the demat account in case of Bonus, Split, Merger, Consolidation etc.
6. Eliminates multiple communication requirements: Transactions are notified through electronic alerts, removing the need for each stakeholder to contact the company, trader, investor.
7. The change in address is updated with each company in which the investor invests through the Depository Participant.
8. Unlike earlier when shares were traded only in lots, now a single share can be bought/sold.
9. With the removal of stamp duty costs, which were otherwise associated with physical records of securities earlier, there has been a significant reduction in the cost of doing business.

Key Elements of a Demat Account

1. Depository

There are two authorized depositories operating in India namely Central Depository of Securities Limited and National Depository of Securities Limited Both these institutions hold electronically pre-verified shares

2. Depository Participant (DP)

Any financial institution registered under SEBI can act as an agent of the depository and undertake transactions for the investor. The medium of any depository service should be DP. A DP can be a financial institution, scheduled commercial bank, a foreign bank in India (RBI approved), a stockbroker, clearinghouse, state financial corporation, share transfer agent, non-banking financial company, etc. SEBI assigns a unique ID to each DP. Provides code.

3. Investors

An investor is a person who owns securities. In this case, the person holding the demat account is the investor.

4. Unique ID

Each demat account has a unique 16 digit identification number which ensures smooth and transparent processing of securities.

Facilities Available with Demat Account

A demat account is not only used to hold your financial securities; It can also be useful in several other functions:

1. Investment Transfer

The account holder can transfer all or part of his holdings to any other person. The account holder is only required to fill in the delivery instruction slip with accurate information and seamless transfer of shares or other holdings can be done.

2. Amputation

An investor may choose to convert his physical share certificates or other physical records of securities into electronic form through the process of dematerialization. To do so, the account holder has to fill in the Demat request form (available with each DP) detailing the information on the physical certificates and submit it to the DP along with the original certificates. Since each type of security has a separate International Securities Identification Number (ISIN), the investor must separate the forms for each security.

The DP verifies all the documents, updates the DP investor account, and the depository makes a note of the changes.

Similar to dematerialisation, the demat security can be processed again into a physical record through materialisation. For this, the investor needs to fill a Remat request form with ISIN.

4. Corporate Actions

The securities in the demat account are linked to the company. In such a case, whenever there is a split in equity, bonus is issued, or the company takes any other action relating to shares or other securities, the investor is informed, and the security position is updated automatically. Thanks to the centralized system. A demat account makes it easy for the investor to keep track of his investments.

Demat Account Types

There are three types of demate accounts that can be opened in India depending on the residential status of the investor:

Regular Demat Account: For investors resident in India.

Repatriable Demat Account: Non-Resident Indians maintaining Non-Resident Rupee Account (NRE) can open this type of Demat account. This account allows international transfer of funds.

Non-Repatriable Demat Account – Non-Resident Indians having Non-Resident Ordinary Rupee Account (NRO) can open this type of Demat account. However, it does not allow international transfer of funds.