Stock trading based on Demat accounts and trading accounts has become much more convenient than offline trading. Your online Demat account keeps your financial securities safely in electronic form. You can create a Demat account online with a registered stockbroker following the established online process.
Demat Account Meaninghas already been defined. Before elaboration on how to open Demat account, let us give you a brief of the primary functions of a Demat account that facilitate convenient online trading in the stock market.
Functions of a Demat Account
- A Demat account stores all the financial instruments you own in the stock market. You can keep your shares, corporate bonds, government bonds, exchange-traded funds, mutual funds, insurance plans, and various other types of financial securities. There is no limit to holding values in your regular Demat account but a basic Demat account holder needs to limit their holding value.
- It facilitates the conversion of shares from physical to electronic form. If you still own shares in the physical form due to sentimental values like heredity, you can convert them into digital format by opening your Demat account.
- It speeds up the transfer of securities between buyers and sellers or companies and buyers. When the stock market was operated offline following the traditional trading system, a single trade took many weeks to initiate share transfer. Online trading based on Demat accounts facilitates quick share transfer, taking only T+2 days (transaction day + 2 days).
- Investors can automatically get corporate benefits into their Demat account, like bonuses/splits/rights arising from consolidation, merger, acquisition, etc. Even if your Demat account is not operated or you freeze it, you will continue to receive your corporate benefits.
- The best thing is that it has solved the odd-lot issue. A Demat account allows you to invest even in a single security.
To open such a beneficial account, you need to follow the easy process mentioned below.
How to Open a Demat Account Online – Elaborated Steps
Step 1: Decide on your investment values
There are two types of Demat accounts depending on the portfolio values – Basic Services Demat Account (BSDA) and a Regular Demat Account. The value of holding in a BSDA can be up to Rs. two lakhs at any date. In contrast, a regular Demat account does not bind with the maximum portfolio value. The status of your BSDA will automatically be changed to a regular Demat account (non-BSDA) if the holding values go beyond Rs. two lakhs.
Step 2: Decide on the Stockbroker
An individual should open an online Demat account with a registered stockbroker only. You can shortlist stockbrokers based on their reputation for the Demat services. Different types of charges are associated with a Demat account. You can look for a stockbroker with lower Demat account costs than others. Most investors prefer discount brokers that have waived off account maintenance charges (AMC) for the first year of opening the account.
Step 3: Fill out the Demat Account Opening Form
Once you have finalized a stockbroker, you can access the online Demat account opening form on the broker’s official website. Enter personal details of the applicant, including your name, residential address, phone number, and email ID. Ensure you enter your active phone number and email ID to receive the OTP to continue with further steps.
Step 4: Upload KYC (Know Your Customer) Documents
Get ready with scanned copies of the applicant’s KYC documents – PAN card, identity proof, bank account statement, and resident proof. Now upload these KYC documents in the online Demat account form.
Step 5: In-Person Verification (IPV)
You need to go through an IPV process to verify your identity in the stockbroker’s database. It is an online verification process using a webcam or a smartphone.
Step 6: eSign the online Demat account opening form
The last step is to read the agreement defining Demat services levied charges, and the duties and responsibilities of the Demat account holder and stockbroker. Make sure you read every point of the agreement carefully before putting your e-sign on it.
Once the broker verifies your identity and documents, you will get your Demat account login credentials and Demat account number through courier or in your email ID, depending on the stockbroker. Research well and start investing in the stock market using your Demat account. You will be able to use your Demat securities to access the margin trading facility.
