WHAT IS DEMAT ACCOUNT?

Demat Account allows you to buy, sell and transact shares

without the endless paperwork and delays. It is also safe, secure
and convenient.
Demat refers to dematerialised account. Just as you have want
to open an account with a bank to save your money, make
cheque payments etc, you need to open a demat account if you
want to buy and sell stocks. So it is just like a bank account
where actual money is replaced by shares. You have to
approach DP’s {remember, they are like bank braches}, to open
your demat account.

Let’s say your portfolio has 100 of Satyam, 200 of IBM and 120 of
TCS shares. All these will show in your demat account. So you
don’t have to possess any physical certificates showing that you
own these shares. They are all held electronically in your
account. AS you buy and sell these shares, they are adjusted in
your account. Just like a bank passbook or statements, the DP
will provide you with periodic statements of holdings and
transactions

WHY DEMAT?
The demat account reduces brokerage charges, makes
pledging/hypothecation of shares easier, enables quick
ownership of securities on settlement resulting in increased
liquidity, avoids confusion in the ownership title of securities,
and provides easy receipt of public issue allotments. It also
helps you avoid bad delivery caused by signature mismatch,
postal delays and loss of certificates in transit. Demat account
holders can also avoid stamp duty, avoid filling up transfer
deeds and obtain quick receipt of such benefits as stock splits
and bonuses.

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OPENING A DEMAT
ACCOUNT?

STEPS
First an investor has to approach a DP and fill up an account
opening form. The account opening form must be supported by
copies of any one of the approved documents to serve as proof
of identity {POI} and proof of address {POA} as specified by
SEBI. Besides, production of PAN card in the original at the time
of opening of account has been made mandatory effective from
April 01, 2006.
Further, the investor has to sign an agreement with DP in a
depository prescribed standard format, which details rights and
duties of investor and DP. The DP will open an account in the
system and give an account number, which is also called as
BOID {Beneficiary Owner Identification Number}.
Further, SEBI has vide circular dated November 09, 2005 advised
that with effect from January 09, 2006, no charges shall be levied
by a depository on DP and consequently, by DP on Beneficiary
Owner {BO} when the BO transfers all the securities lying in his
account to another branch of the same DP or to another DP of
the same depository or another depository, provided the BO
Account/s at transferee DP and at transferor DP are one and the
same, i.e. identical in all respects.

STEPS
• You can open more than one depository account in the
same name with single DP/ multiple DP’s.
• No minimum balance is required to be maintained in a
depository account.
• You can give a one time standing instruction to your DP to
receive all the credits coming to your depository account
automatically.

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PROCEDURE
• Fill account opening form {available with your DP}.
• Give your DP the duly filled account opening form with
introduction documents as may be required.
• Sign agreement with DP {agreement will state rights and
obligations of both parties}. The agreement will contain the
fee structure of your DP. Your DP will give you a copy of
the signed agreement for your record.
• DP would give you Client Id no. {Account no.} Once your
depository account is opened. This Client Id no. along with
your DP Id no. forms a unique combination. Both these
nos. should be quoted in all your future correspondence
with DP /NSDL /Issuing Company / their registrar and
transfer {R & T} agent.
• Your DP would give you pre-printed instruction slips for
depository services viz., dematerialization, delivery
instruction for trades, etc.. Preserve these carefully.
• Your DP would give you a list of deadlines for giving
instructions for various depository activities viz., transfer
for effecting sale, purchase, etc... If not, check with DP.

DOCUMENTS REQUIRED

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 The extent of documentation required to open a demat
account may vary according to your relationship with the
institution. If you plan to open a demat account with a bank, a
savings account holder has and edge over the non-account
holder. In fact, banks usually offer additional incentives to
customers who open a demat account with them.
Along with the application form, your photographs (with co-
applicants) and proof of identity / residence / date of birth
have to be submitted.
The DP’s also ask for a DP – Client Agreement to be executed
on non-judicial stamp paper.

Here is a board list:

• PAN card
• Voter’s ID
• Passport
• Ration card
• Driver’s license
• Photo credit card
• Employee ID card
• Bank attestation
• IT returns
• Electricity/ Landline phone bill

While they only ask for photocopies of the documents, they will
need the originals for verification. You will have to submit a
passport size photograph on which you sign across.

DEMAT CONVERSION
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In order to dematerialize physical securities one has to fill in a
DRF {Demat Request Form} which is available with the DP and
submit the same along with physical certificates one wishes to
dematerialize. Separate DRF has to be filled with each ISIN
number.

The complete process of dematerialization is outlined below:

• Surrender certificates for dematerialization to your

Depository Participant.
• Depository Participant intimates Depository of the request
through system.
• Depository Participant submits the certificates to the
registrar of the Issuer Company.
• Registrar confirms the Dematerialization request from
depository.
• After dematerializing the certificates, Registrar updates
accounts and informs depository of the completion of
dematerialization.
• Depository updates its accounts and informs the
Depository Participant.
• Depository Participant updates the demat account of the
investor

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DEMAT BENEFITS
The benefits are enlisted below:

• A safe and convenient way to hold securities.

• Immediate transfer of securities.
• No stamp duty on transfer of securities.
• Elimination of risks associated with physical certificates
such as bad delivery, fake securities, delays, thefts,
etc...
• Reduction in paperwork involved in transfer of
securities.
• Reduction in transaction cost.
• No odd lot problem, even one share can be sold.
• Nomination facility.
• Change in address recorded with DP gets registered
with all companies in which investor holds securities
electronically eliminating the need to correspond with
each of them separately.
• Transmission of securities is done by DP eliminating
correspondence with companies.
• Automatic credit into demat account of shares, arising
out of bonus /splits /consolidation /merger etc.
• Holding investments in equity and debt instruments in a
single account.

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