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HOW TO OPEN A DEMAT ACCOUNT? Don’t Worry It's Not A Rocket Science

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The population of India is around 1.3 billion, out of which a marginal percentage of 1.5 (or 18 million) people invest in the stock market! 

Surprising statistics? 

We Indian can take pride in a number of things but investing in either the stock market or mutual funds does not fall in that list. The same notion of putting money in assets like land and jewellery prevails among the majority of people. One can come up with a variety of ifs and buts like lack of knowledge, lack of trust in the equity market, sticking to traditional ways of allocating savings so on and so forth. 

It's high time we leave all these reasons behind.

Take the first step towards investment by opening a Demat account. 

                                   INVESTING: INDIA VERSUS WORLD

Let me start with a real-life example. In my middle-class family, none of us was into investment until the past 2 years. I and my brother had seen our father investing in assets like real estate or fixed deposits. 

But, as we grew up and became acquainted as well as aware of the stock market, we did not limit our investing domain to just these two options. My brother started with long term investment in the stock market and I am looking forward to investing in IPOs. We did learn the concept of saving from our parents but with that, we also explored more options of investing for gaining decent returns. 

In India, the old notion of saving or investing is rooted deeply and it needs to change! 

In order to understand the difference between the investing pattern in India and the world, have a look at the following pie charts. 

Investing Pattern Of World Versus India 

investing vs world

‘Playing safe’ when it comes to managing your finances is not wrong but having said that, it is important to broaden your investing options. You can invest through safer routes even in the stock market or mutual funds. 

The more people would invest in the stock market, more will be the flow of capital in the market and finally, it would have a positive impact on our economy. By investing our money in assets like gold we tend to disrupt the flow of money and for any developing country that must not be the goal! 

TAKE THE FIRST STEP: HOW TO OPEN A  DEMAT ACCOUNT

As working professionals, all of us need a bank account to keep our money. Akin is the situation of a Demat account. You must have heard this term quite often. So, let us first clear our basic concepts regarding it and then move to discuss the easy way to open a Demat account. 

Basics of Demat Account

The term ‘Demat’ is a shorter form of ‘dematerialisation’. A Demat account is used to securely hold your investments like bonds, shares, mutual funds, ETFs etc. According to the rule imposed by SEBI if you wish to invest or trade in the stock market you need a Demat account.  

Before we jump to the question - how and where to open a Demat account, take a note of following points  

- Depository Participants: Abbreviated as DP, it is an agent or intermediary working under the central depository. Through it,  traders, as well as investors, can avail necessary services. In India, we have 2 main/central depositories working in this regard namely, NSDL and CDSL. Both of them are regulated by SEBI. 

- Client ID - It is basically a 16-digit  number which is assigned to each Demat account as well as it acts as your identity. Out of the 16 digits of a client ID, the first 8 digits represent DP and the next set of 8 digits represent unique identification of the person who owns the Demat account. 

Documents Required To Open A Demat Account 

Well, if you think that opening a Demat account is nothing less than a task, then I would surely like to break that myth. You do not need a long list of documents for it and it is quite hassle-free work. There is a requirement of a few basic documents and the work is sorted. Have a look at the required documents  

documents for demat account

- Address Proof: For address proof, you upload a copy of documents that have a mention of your original address like voter identity card, Aadhaar card, electricity bill, ration card, driver’s license, etc

- Identity Proof: As identity proof, you need to upload a copy of your PAN card that has a clear photo of you.  

- Bank Account Proof: For presenting a bank account proof you need a copy of the passbook of your bank account. In this case, a copy of a bank statement also works but take a note of one point that it should not be older than 3 months. 

- A Proof Of Your Income: If you are an earning individual then you need a copy of the latest salary slip. In place of salary slip, you may have a copy of Income Tax Return as well. 

Once you have these basic documents, it is time to move to the next step. 

Best Way To Open A Demat Account: A Step-Wise Guide 

Without much-ado let us understand the step by step process of opening a Demat account. 

- Begin with choosing a depository participant- 

The very first thing you need to do is choose a depository participant for opening a Demat account. The details of the depository participant are indicated in the former part of the blog. In our country, you can easily avail the service provided by DP through stockbrokers, banks (almost all the major banks provide this service owing to the surging demand) or online investing platforms. 

But, while choosing the right DP for yourself, you have a need to tick the checklist of your requirements as an investor. When you have so many options available then choose that DP whose services align with your needs. 

- Fill the Form - 

Do not get intimidated with the process of filling the form. It is a legal yet simple formality. Once you have decided your depository participant, simply visit their official website to avail the online form for opening a new Demat account. Find the form, open and fill the necessary details. 

There are some depository participants that provide you with the option of opening both Demat and trading accounts at once. So, it's your call, you want one or both of the accounts as per your investing requirements. 

- Then comes the KYC- 

In recent years, the process of KYC (or Know your customers) has become a crucial part of many bank-related proceedings. Akin is the case of Demat accounts. After you have filled the basic form for the new Demat account, you will land on the KYC section. The KYC norms must be filled with the utmost care and at this step, you will need you scanned copy of the documents mentioned above (address proof, ID, income proof, etc) 

- Verification -

Once you have completed the above mentioned three steps, you will have to process a next process known as IPV or ‘In-Person Verification’. Well, it's just a fancy term used for document verification which is a necessary exercise. Under this process, the sanctity of your documents is verified. The process of IPV can be offline or online, it depends on the services offered by the DP you choose. 

- Sign the agreement and get the Beneficial Owner Identification Number

After you have completed the process of IPV you will be required to enter into an agreement with your DP by signing the agreement document. The agreement document indicates all kind of rules, rights and duties of both parties namely, you (the investor) and your DP (investor’s depository participant) 

Finally, your form will be processed and once approved you will get a Beneficial Owner Identification Number (abbreviated as BO ID). This ID is used for accessing the Demat account. 

Voila! 

See, were these steps difficult?

No! Right? 

Then what are you waiting for? Difficult times come with no alarm and as humans, all we can do is be financially fit to be able to sail through them. 

Investment is the key, unlock your financial freedom! 

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author

Shivani