Are you planning on jumping in the pool of shares? Then, having a storage facility to keep stocks is a must! The way your normal bank account stores your green notes, there ought to be an account that keeps the records of your share trades. That’s where your Demat account steps in!

Demat account, which is short for “dematerialized account”, is an online folio of one’s shares and other securities. Instead of holding physical certificates of trading, this account helps you maintain them electronically and is accessible from all places. 

Demat trading was introduced to India back in 1996. To have hassle-free trading, it is a compulsory step to have a Demat account made. It is a faster approach to bookkeeping and one of the most accurate record holders. The services of a Demat account are provided by various depositories which are charged as per the volume it's holding and the type of account that it is subscribed for. 

Certain depositories offer such services free of cost, like NSDL (National Securities and Depository Limited) and CDSL (Central Depository Services Limited).  Depending on your residency criteria, you can opt for the type of Demat account you are eligible for.

• Regular Demat Account: All Indian citizens who reside in the country can have a regular Demat account.

• Repatriable Demat Account: All non-residing Indian citizens can open such an account and transfer money from overseas with this account if it is linked with an NRE bank account.

• Non-Repatriable Demat Account: Similar to the repatriable Demat account, this account can also be owned by an NRI, except they cannot transfer funds overseas. Furthermore, one has to link an NRO bank account to operate and own such a Demat account.

Now when we talk about the process of how a Demat account works, certain elements come into place. First comes the depository that manages the investment portfolios of the investors, whereas, on the other hand, there are depository participants who act as agents between investors and depositors with individual interests. 

DPs (depository participants) keep a track of the transactions of their customers and also help in suggesting potential stock markets to the customer. A list of the DPs is provided on the websites of NSDL and CDSL. After approaching an appropriate DP, one needs to fill in the account opening form. After following the instructions of the entire process, one needs to attach the required documents and photocopies of the same.

How to open a Demat account

To open a Demat account, certain documents are required for verification. This process is similar to the process when you open a bank account. A list of the documents is further mentioned here.

• Identity proof (PAN card, Aadhar card or any other government-issued identity card)
• Address proof (passport, electricity bill, bank passbook, voter ID, driving license)
• Income proof (salary slip, income tax return copy, latest bank account statement)

After all the documents are verified, one needs to sign an agreement with their DP, stating the rights and duties of investors and DP. After everything is done, the DP would provide a client ID. And voilà! A Demat account is created. Further, an account maintenance charge (AMC) is a payment that you are required to make annually.

Times have become simpler, when one signs up with a broker, they will help set up the Demat account with one’s trading account seamlessly. Banks can also be contacted to begin the process. 

To have free-flowing buying and selling of shares and other securities, it is mandated to have a trading account alongside your Demat account that operates under guidelines provided by SEBI.

Thus, it liberates the investors to have quicker and simpler electronic processes while playing with stocks and money!