Demat account
Demat account

The year 2020 proved to be a boon for brokers as millions flocked to the stock market for investing. The global pandemic forced people to stay at home which led to increased investor interest in the stock market. Moreover, recovering from the lows of March 2020, the stock market entered a bullish phase in the later half of 2020. Consequently, 4.9 million Demat accounts were opened in 2020 alone – the highest in the past decade.

The year 2019 saw an addition of 4 million Demat accounts. In the past 3 years, the average number of new Demat accounts opened is 4.3 million per year. As of January 2021, the total number of Demat accounts in India stands at 51.5 million.

Other reasons for this phenomenal surge in Demat account numbers are e-KYC, e-signing of Aadhar card, the stickiness of retail investors, and volatile markets conducive for short-term profits.

Demat meaning

Demat is commonly known as Dematerialization. A Demat account holds the physical form of securities into digital or electronic form. In short, it is an electronic repository of your security certificates. In India, NSDL and CDSL are entrusted with the responsibility of managing Demat accounts. Authorized DPs (Depository Participants) are registered with either of the two depositories.

Demat account has been made mandatory as per SEBI guidelines after moving totally on a digital platform to trade in the stock market and participate in IPOs etc. Anyone who is willing to trade in the stock market needs to open a Demat account. You may go through the consecutive paragraphs to know more about the online procedure to open a Demat account.

Online procedure to open Demat account

Step 1: Visit the website of a stockbroker which acts as a DP of your choice. Click on the online Demat application form link to open the form.

Step 2: Fill your basic details like name, address, PAN card number, Aadhar card number, contact number, e-mail ID, etc as required.

Step 3: Your Demat account will be linked to your bank account for adding funds to trade. Add your bank account details in this step.

Step 4: This step is important. Usually, stockbrokers offer a variety of subscription plans tailor-made to varying investment styles. So, depending on your stock investment experience, trading frequency, and trading volumes, you may choose a suitable plan. Choosing the appropriate plan helps you lower your brokerage costs on all types of trades – delivery trades, intraday trades, and derivative trades.

As a novice, you may opt for plans that are exclusively meant for beginners. As you gain expertise in stock trading, you may upgrade yourselves to higher plans. Usually, plans for stock market experts include an MTF (Margin Trade Financing) option. The MTF facility helps you leverage a position in the market by paying cash or by pledging your securities as collateral.

Step 5: In this step, you need to upload scanned copies of identity and address proofs (Aadhar card, Election ID, driving license, etc), PAN card, and cancelled bank cheque and other supporting documents which is required.

Step 6: This step entails In-Person Verification (IPV). You may have to record your video, reading aloud a script or a message that is provided on the recording window. Some broker websites may accept pre-recorded videos too.

Step 7: This is the final step wherein you verify your form and affix your e-signature before submitting it. You may also receive an OTP on your Aadhaar registered number for validation purposes.

These are the various steps involved in the online Demat account application process.

The Bottom Line

Opening a Demat account online is a paperless, hassle-free, quick, and easy procedure now-a-days. However, you cannot trade with just a Demat account. You will require a trading account too. A trading account is an interface for buying and selling securities in the secondary markets. The process for opening a trading account is the same as that of a Demat account. Some brokers allow you to open Demat and trading accounts for free. You may choose such brokers to reduce your total transaction costs.

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