Young Investor

Open a demat account

BL Research Bureau | Updated on March 05, 2011 Published on March 05, 2011

The preliminary step to investing is the opening of a demat account, which holds shares in electronic form and saves you the bother of holding shares in the paper form. Here's a brief guide on how you can open a demat account. Demat services are provided by banks, financial institutions and stock broking houses. The broking houses here also act as depository participants (DPs), intermediating between the depositories — CDSL or NSDL and the investor. To open a demat account you have to make an application to a DP and submit the required documents. Once you have a demat account to your name, you can open a trading account with a broker of your choice. Having done this, the shares bought and sold by you will get reflected in your demat account. You can also dematerialise and transfer your previously held physical share to this account. The DP, at regular intervals, would provide you with an account statement showing the balance of shares and transactions during that period. The following steps would help you open one :

Look out for a DP

There are several institutions that offer demat account. You can either choose a bank/financial institution or a stock broker who could provide you the DP services as well. The factors that guide your selection should be the charges and location convenience. The fees charged for demat accounts differ across the industry. Though the rates change, the charges normally go under the following heads: Account opening fee, Annual maintenance fee and Transaction fee. A bank or other DP may sometimes waive the initial account opening fees. If you choose a bank where you have been holding your savings account for long, then much of the paper work would get simpler and documentation will not take much time., However, depository participants also charge service tax, as applicable. You can browse through the various available DP options with CDSL using the following link

> http://www.cdslindia.com/demat_acct/open_demat.jsp

Get the documents in place

Duly filled account opening form and passport size photos

A copy of PAN card as proof of identity

Personalised cheque/Copy of the bank passbook

A copy of passport/voter ID/ ration card as proof of address

Signing of the DP-investor agreement

After you provide these documents, the agent would complete the other formalities with the depository and facilitate opening of the account. You would then be given a unique account number (BO ID- Beneficiary Owner Identity), which would serve as a reference number for all further transactions. You must also collect delivery instruction (DI) slips from the DP. A DI slip ( instruction to debit your account and credit the brokers') has to be filled and sent to the DP on every delivery (sale of shares) you make. The DI instruction has to reach the DP the next day after the sale, failing which the securities wouldn't reach the broker and hence the exchange. This can lead to auction of the security, which may result in you bearing any additional costs. You can escape this irksome process by giving standing instruction (POA-Power of Attorney) for delivery of stocks that you sell to your stockbroker.

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