After the introduction of the Demat account, the Indian Stock Market was never the same again as it reached newer heights by providing the facility of online trading to investors. The physical shares are converted into electronic form with the help of a Demat account.
This makes trading easier and hassle-free as you no longer have to maintain and carry the share certificates and documents of other investments from one place to another for trading purposes.
However, even after completing two decades after its first use, some investors don’t know everything about a Demat account. Here are some FAQs that might shed some light on its necessity and uses:
1.Can I open a Demat account with CDSL or NSDL directly?
Even though the CDSL and NSDL are the main depository bodies in India, you cannot open a Demat account by approaching them directly.
For opening an account, you will have to seek the assistance of a DP (Depository Participant) who is registered with either one of these depositories.
2. How to open a Demat account online?
Choose a depository partner who is registered with CDSL or NSDL and fill an online form with his help. You will need documents like Aadhar Card and PAN Card for completing the eKYC verification process.
The procedure is quite simple and straightforward and even a minor can open a Demat account online by using the same process.
3. Which are the types of Demat accounts?
There are three types of Demat account viz. regular, non-repatriable, and repatriable account.
- A regular account can be held by the residents of India and it can be opened with the help of your regular bank account.
- The proceeds from sale of securities can be transferred abroad with a repatriable Demat account. An NRE account is required for the same. The repatriable account is for a non-resident Indian who still holds Indian citizenship.
- The non-repatriable account is for the Indians who are staying in some other country temporarily. It requires an NRO or NRE account but the funds cannot be converted into some other currency and neither can it be transferred to the other country.
4. What is the main difference between a Demat and a trading account?
A Demat account is used to hold the share certificates in digital form. However, you will need a trading account whenever you want to buy or sell shares. For that, you will have to connect your Demat account with the trading account.
DPs offer the services required for operating both these accounts these days to facilitate hassle-free trading.
5. Can I open multiple Demat accounts?
You can open multiple Demat accounts with different DP as per your choice. You cannot open multiple Demat accounts with the same DP. Many investors utilize this option to invest in different securities. However, we recommend you to open multiple Demat accounts only if you require them.
Even one Demat account can be used to hold multiple securities like debentures, mutual funds, shares, government bonds, etc. and it also helps you to keep track of your investments easily.
6. Which charges are associated with a Demat account?
You might have to pay multiple charges to operate and maintain a Demat account as it also depends on the DP you have chosen.
Some of these charges include AMC (Annual Maintenance Charges), transaction costs (for re/Dematerialization of shares, security transfers, etc.) and custodian charges (for smoother and more secure trading), etc.
7. How to choose a DP?
A depository broker (registered with either NSDL or CDSL) who offers a wide range of products and services at inexpensive rates should be preferred.
You can also appoint a discount broker to low open a low brokerage Demat account as he will offer only the services and products that you require. Moreover, discount brokers provide the option of subscribing to a yearly plan that charges a flat brokerage rate per trade.