What is a demat account?

Keeping money idle in your safe or bank account will not increase its value. Idle money might get its value decreased in a few years due to inflation and other factors. It is better to invest your money in financial securities to make it work for you. You might get high returns on your investments and secure your future. One can start their investment journey by applying for a Demat account in India. Read on to understand the significance of Demat accounts and the process to apply for one.

Why is Demat Account Essential to Start Your Investment Journey?

Most beginners want to indulge in online trading in India. Gone are the days when physical trading at stock exchanges was preferred by investors. To start your online trading journey, you need a brokerage and a Demat account. A brokerage account will allow you to purchase different securities from stock exchanges, like bonds, stocks, mutual fund units, and ETFs. The brokerage account also helps sell these securities. You can store these securities in physical and electronic formats. Very few investors decide to hold financial securities in the form of trade certificates issued by stock exchanges. This is because investors would collect certificates for every trade they make via the brokerage account.

Since physical trade certificates can get lost or damaged, investors now prefer storing securities in an electronic form. Only a Demat account in India can help you store securities electronically. Securities are purchased via a brokerage account and dematerialised before being transferred to a Demat account. Your financial securities are debited from the Demat account during sale orders. Besides holding electronic securities, a Demat account is also a tool for portfolio monitoring. Since all holdings are stored within a Demat account, investors can view their portfolio anytime. You can invest in a wide range of securities/assets via a Demat account. You will be limited to only a few investment options like the National Pension System, FDs, and government securities without a Demat account.

How to Easily Open a New Demat Account?

Now that you understand the significance of a Demat account, here’s how to apply for one:

  • Choose a broker or DP (Depository Participant) in India to apply for a new Demat account.
  • Visit the website or online portal of the Demat account provider.
  • Find the option to apply for a new Demat account on the website.
  • Start providing your personal and contact details to complete the Demat account application. Do not provide inaccurate information in your Demat account application.
  • Upload the KYC documents, like PAN card, address proof, and cancelled cheque, on the website after completing the Demat account application.
  • Wait for the Demat account provider to verify KYC documents and send a response.
  • Complete the in-person verification (if required). Some Demat account providers might complete this step over a video call.
  • Receive your Demat account credentials upon final verification. You can now trade securities and hold them in electronic format.

Understanding the Eligibility for Demat Accounts in India

Anyone above eighteen years of age can apply for a new Demat account in India. Citizens of India can apply for regular Demat accounts and BSDAs (Basic Services Demat Accounts). A regular Demat account does not have any trading restrictions, while a BSDA might have some restrictions on the value of holdings. Minors can also open Demat accounts in Inda. However, a minor Demat account is handled by the parent or legal guardian. NRIs (Non-Resident Indians) have the option of applying for repatriable and non-repatriable Demat accounts. Investors in India can also avail of the joint Demat account facility.

Conclusion

Many investors open Demat accounts daily in India. A Demat account can help you invest in a wide range of securities available in financial markets. You can link the Demat account with the brokerage account for secure trading in India. Start your investment journey in India by applying for a new dematerialisation account! 

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