How To Open A Demat Account? Know Its Workings

A Demat account or a dematerialised account allows investors to hold their shares and securities in an electronic format.

With the dawn of finfluencers, stock market trading has become a lucrative choice for many individual investors today. More and more common people now want to try their luck in the stock market and use it as an alternate source of income. However, to take the first step, one needs to open a Demat account. Let’s try to understand what it is and how we can open it. 

A Demat account or a dematerialised account allows investors to hold their shares and securities in an electronic format. These include initial public offerings, bonds, government securities, mutual fund units, and exchange-traded funds (ETFs). In addition to ensuring the safety of the investors’ investments, a Demat account also helps in easily maintaining and handling the shares and securities. 

How Does It Work?

A Demat account can be opened with a Depository Participant (DP). The DP is the bridge between the investor and the depository NSDL (National Securities Depository Limited) or CDSL (Central Depository Services (India) Limited). Essentially, a DP works like a bank, but instead of money, it stores assets like securities. 

To open a Demat account, you need to follow these steps.

Find A DP

Firstly, you need to find a DP that offers Demat accounts. Banks, stockbrokers, or financial institutions offer these services. So, you need to select one that works for you. 

Documents

After choosing a DP, you need to complete the application form with your identity and address proofs like passport, driving license, voter ID, etc,. Then, the next set of documents required is your income proof like a cancelled cheque, bank details, and PAN card. 

Verification

Once you submit your application with the required documents, the DP will verify your details and activate your account.

After the DP opens your account, you can now trade in shares, mutual funds, and other securities through the Demat account. After your trading is completed, the shares will be credited or debited to your Demat account.