What is a demat account and why it is required?

Shares and certain securities are held electronically in a Dematerialized (or “Demat”) account, instead of the investor taking physical possession of certificates. A Dematerialized account is opened by the investor to convert his physical shares to the electronic mode of holding.  The Dematerialized account number is quoted for all transactions to enable electronic settlements of trades to take place. Every shareholder will have a Dematerialized account for the purpose of transacting shares or debentures which are in Electronic or demat form.

How to open a demat account?

Opening an individual Demat account has two steps: You approach a Depository Participant (a bank or a broker) and fill up the Demat account-opening booklet. The Web sites of the NSDL and the CDSL list the approved DPs. You will then receive an account number and a DP ID number for the account. Once this account is opened you can dematerilise your current physical holding, or buy and sell shares in the stock market.

 Are there any charges levied on demat account?

There are many types of charges levied on a demat account.

1. Account opening charges: Most DPs charge for opening an account, but many brokers are willing to waive it. Banks may not waive the charges.

2. Annual Maintenance Charges – charged by all DPs.

3. Custodian Fee: this is charged by the DP as a charge per ISIN – and normally on a quarterly basis. All DPs charge this amount.

4. Transaction Fee: charged whenever you buy or sell a share / any demat instrument

5. Dematerailsation Fee: when you demat your existing physical shares you will have to pay demat charges – it is based on the number of physical shares that you have.

What is depository?

Depository is a place where something is deposited for storage or security purposes. It is  a company, bank or an institution that holds and facilitates the exchange of securities.

 

What is dematerialisation?

The move from physical certificates to electronic keeping. Actual stock certificates are being removed and retired from circulation in exchange for electronic recording. If you wish to buy and sell shares today you need to keep your shares in this mode.

    Can multiple demat accounts be opened?

Yes. A person can open as many demat accounts as he wishes. In fact if he is holding shares with 2-3 people he will need to open many demat accounts – one with each person. Let us say Mr. A holds a few shares with his wife as a second owner, some with first son and some with his mother, he WILL HAVE TO OPEN 3 accounts. One for himself with his wife, one with his son as the second holder and one with his mother as the second holder. So yes, he can open multiple demat accounts.

What is rematerialisation?

Rematerialisation is a process in which you can convert your electronic holding into physical share certificates

Can an investor operate a joint account?

Yes, and it operates as a Joint Account. Unlike a bank account it does not operate on an Either or Survivor basis.