In the modern era, the source of income is a serious concern for every individual. There are people who look for various avenues from where additional income can be generated, and for them, the share market is the ideal place that can fulfill their requirements as well as dreams in a short span. However, for this to have knowledge of the market, finance and trading are much required. For trading in the share market, there are also some requirements that one needs to fulfill as a trader.
Demat account is an account used to hold the shares in the electronic form. By storing the shares in demat account, the stocks remain in a dematerialized form. The process of converting the stocks from physical state to electronic format is referred to as dematerialization. Each demat account is specified a number known as the demat account number that is used to
allow the electronic settlements for all the executable trades. This account can be compared to a bank account where a record of all the transactions is maintained. Similarly, a record of securities credited or debited is also preserved in an electronic form. However, no share is required for opening the account. The account operates finely with zero balance of shares.
The need for a Demat Account
Physically maintaining the record of all the transactions can be quite tedious and clumsy. Moreover, manipulating the physical record is quite easy so, it is a good option to keep an electronic record and reduce the risk of fake shares. Hence, demat account is a must for trading in stock market. The government body, SEBI that controls the trade of stock market has allowed a physical record of 500 shares. However, this is not a preferable option anymore. The best Demat account in India has the certificate of all the financial records like bonds, shares, mutual funds, and government securities.
Working of a Demat Account
The two depositories that control the shares deposited by the participants are NSDL (National Securities Depositories Limited) and CDSL (Central Depository Services Limited). The following documents are required for a demat account:
- Identity Proof
- PAN Card
- Residential proof like ration card, electricity bill, driving license, phone bill, etc
- Details of bank account
- Recent passport size photographs
Opening a Demat Account
In order to open a demat account; all the original documents are required. These documents have to be submitted to DP who gives a form that needs to be filled with all the correct information. After this, the documents are taken for the verification process.
- The DP will then provide the set of rules and regulations for opening the demat account along with the mandatory charges that are to be paid.
- An officer member will then verify the information provided.
- Then the application is passed on for further process. Once the application is verified, an account number is allotted with client ID. This way a demat account can be generated and can be accessed for storing the transaction records.