In India Demat Account is required to buy or
sell stocks. Read about opening dematerialised account in India
Demat Account
Demat refers to a dematerialised account. Demat
account is just like a bank account where actual money is replaced by
shares. Just as a bank account is required if we want to save money or
make cheque payments, we need to open a demat account in order to buy or
sell shares. A Demat Account holds portfolio of shares in electronic
form and obviates the need to hold shares in physical form. The account
offers a secure and convenient way to keep track of shares and
investments without the hassle of handling physical documents that get
mutilated or lost in transit. The Securities and Exchange Board of India
(SEBI) mandates a demat account for share trading involving more than
500 shares.
Benefits of Demat Account
- Eliminates risks associated with physical certificates such as
bad delivery, fake securities, delays, forgery, counterfeiting,
thefts and loss due to fire.
- Reduces brokerage charges
- Pledging/Hypothecation of shares is easier
- Enables quick ownership of securities on settlement thereby
resulting in increased liquidity
- Reduction in paperwork involved in transfer of securities
- Demat account obviates the need to pay stamp duty (in case of
physical shares, 0.5 per cent stamp duty is payable).
- There is no odd lot problem. Even one share can be bought or
sold.
Documents Required for Opening a Demat Account
You can open a demat account with a bank or a depository participant
(DP). Banks usually give preference to those customers who have a
savings or current account with the bank. Along with the application
form, following documents are required:
- A cancelled MICR cheque
- Identity proof
- Address proof
- Copy of PAN card (mandatory)
- Photograph of the applicant.
Procedure for Dematerialisation
For dematerialization of physical share certificate(s) you have to first
fill the demat request form (DRF). The form can be obtained from the DP
with whom your demat account is opened. Deface the share certificate(s)
by writing across Surrendered for dematerialisation. Submit the DRF &
share certificate(s) to DP. DP would forward them to the issuer. After
dematerialisation, your depository account would be credited with the
dematerialised securities.
