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How To Create A Demat Account And Start Trading?

By Author: Neha Sharma
Total Articles: 243

An account to hold shares and securities in an electronic format is called as a demat account. A short form of dematerialization account, it involves the process of converting physical share certificates earned during trading to electronic form. This account is one place that holds all kind of investments that includes bonds, mutual funds, government securities, shares and so on.

The benefits include no account opening charges for opening an account in most cases to zero AMC and also has preferential pricing with certain customers. For trading in equities, usually a demat and trading account is opened. While trading account, as the name suggests helps in trading stocks, a demat helps in storing them.

How to open a demat account?

Now, let’s see how to open a demat account with a certain broker or a bank. A customer generally needs to have an account with the bank. Further, you can open two types of accounts: individual and corporate.

➢ For opening an account, approach a representative at the bank who will guide you through the application process or you can fill the form online to apply.

➢ Keep the documents ready: These are some important documents required for both online or offline applications:

○ Documents required for an individual account: Address proof, pan card, a filled KYC form are some of the requirements.

○ Documents required for a corporate account: Some important documents include KYC application form, address proof, pan card of the company, list of directors, passport size photographs, ID proof and the important company-related documents such attested copies of MoUs, tareef sheets, etc.

How Does Trading Work?

National Securities Depositories Limited (NSDL) and the Central Depository Services Limited (CDSL)are two Depositories in India. Shares are held by many depositories mainly through these two. As per the Depositories Act, investors can use the services of these Depositories through depository participants such as some listed banks and FIs. When customers buy or sell shares, these depository participants credit or debit their account.

A demat and trading account can be used to invest in various financial instruments such as equities, Initial Public Offer (IPO), Gold ETF, Systematic Investment Plan (SIP), Rajiv Gandhi Equity Savings Scheme (RGESS), bonds / NCDs and mutual funds. You can also avail loans easily against your shares, mutual funds or bonds.

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