What is a Demat account and how can you open one?

by Manshu on December 3, 2010

in Investments

What is a Demat Account?

I got an email last week from someone asking about opening a demat account, and in the SBI and IDFC thread you might have noticed that there are several people who don’t have demat accounts, but will have to open one soon because nowadays you need one even to invest in these bond issues.

Let’s start with what a Demat account is, and then we can move on to the several options currently available in India.

My grandpa used to have a black briefcase where he stored all his physical share certificates.

Eventually he dematerialized all his shares and moved them to an electronic briefcase, which is how he described his Demat account, and I think this is quite apt to understand the concept.

A Demat account is like a brief case where you store your shares and bonds electronically.

In India there are two Depositories – NSDL and CSDL – and you can think of these depositories as banks that hold your shares and bonds in electronic form.

A regular investor can’t deal with a depository directly, and you have to deal with their agents which are called Depository Participants (DPs).

Demat Account in India

Demat Account in India

There are hundreds of DPs in India, and you can open a demat account with one that suits you in terms of price and convenience. Normally, people open a Demat and a trading account with the same institution as it makes transactions cheaper, and is more convenient to get started as well.

So you could have a trading account and a DP account with SBI or ICICI Direct. It is in fact better to have trading and DP account with the same organization because in those cases you are waived off the DP transaction fees.

Effectively, you are using an agent in the form of a depository participant to avail the services of a depository which are storing your shares and bonds electronically.

There are hundreds of DPs in India, and NSDL provides a very comprehensive list of DPs along with their fees here and here (this data might not be up to date though).

Partial List of Depository Participants in India

If you clicked through the above links to the entire list of DPs then you’ll notice that there are a large number of DPs in India, so for this post I’m trying to create a list which has got some of the better known DP names with only their annual maintenance charges covered.

There are several other charges, but including all of them here will make comparison difficult. I have included a link to the source in this table so you can go check the details there. Since these prices are relatively low – you should think about convenience also, and see if your bank offers demat services, and if you can open one there.

Name Annual Maintenance Charge Detailed Charges
SBI Rs. 400

Rs. 350 for customers receiving statements by e-mail

Link
ICICI Bank Rs. 500

Rs. 450 for customers receiving statements by e-mail

Link
HDFC Bank Rs. 750 for less than 10 transactions

Rs. 500 for 11 – 25 transactions

Rs. 300 for greater than 25 transactions

Link
Citibank Rs. 250 Link
HSBC Rs. 750 Link
Sharekhan Rs. 75 per quarter (300 annually)

Deposit of Rs. 500

Link
Axis Bank Rs. 500 p.a. for customers authorizing Bank to debit DP charges from bank account maintained with Axis Bank, and 2,500 for others. Link
Karur Vysya Bank Rs. 250 per annum Link
Sharekhan Rs. 300 under two plans, and Rs. 500 under another Link
Bank of Baroda Rs. 350 per annum Link

How to open a Demat account?

Once you decide where you want to open your Demat account – contact their representatives, and they will get you started.

You will need the following documentation in order to open a Demat account, so keep this handy while contacting the DP.

Proof of Identity: This includes PAN card, driver’s license, passport, voter card etc.

Proof of Address: This includes the above documents and bank passbooks, identity cards issued by Centre or State governments etc.

Passport size photo

Pan card copy

You will need the following details while opening the demat account:

  • Name of account holder
  • Mailing address
  • Bank account details
  • Guardian details for minors
  • Nomination declarations
  • Standing instructions

When you contact the DP – their agent will let you know if they need any specific documentation, or if you need answers to any other specific questions.

It used to be that only equity investors cared about having a demat account, but with a lot of bond issues coming out in only demat form – I think more and more investors will need to open a demat account, and if you don’t already have one, then do think about spending this four or five hundred bucks per year to take advantage of electronic stock and bond holding.

This post should get you started on what a Demat account is, how and where you can open one, as well as the documents required to open it. Please leave a comment if you have any questions or other feedback.

Views: 58499


Get free daily updates in your email:






{ 100 comments… read them below or add one }

Sanket March 26, 2012 at 2:31 pm

i wated to know that when i do any transaction life buying or selling share any tax will be applied on that or bank will charge any amount every time i buy or sell the share

Reply

vishwanath May 1, 2012 at 8:16 pm

hello sir, can you please say me wats difference between face value and book value?

Reply

anil April 27, 2013 at 12:56 pm

Dear friend

The information which you given was so good and simple even to understood by a layman

regards
Anil eaj

Reply

Manshu April 27, 2013 at 9:06 pm

Thanks Anil!

Reply

discount brokerage in india January 10, 2014 at 12:11 pm

Your presentation is awesome about demat a/c concept.

Reply

nitin May 7, 2014 at 3:20 pm

hello sir, can you please say me wats difference between face value and book value?

Reply

nitin May 7, 2014 at 3:21 pm

ans plz

Reply

Bahubali May 30, 2014 at 5:57 pm

Very useful information..!

Reply

Manshu May 31, 2014 at 5:37 pm

Thanks!

Reply

Mukesh Kumar Malviya June 28, 2014 at 10:16 am

Hi Mansu,

I wasnoticing the stock market for a long period and now I’ve decided to invest in stock market. So I was searching for the information regarded to the opening of demat and trading account.
I am very glad that your article been very helpful.

I would like to know more about stock market related information.

Thanks

Reply

Hemant July 1, 2014 at 9:05 am

please call if you wish to open demat & trading account anywhere in India. 8097011135

Reply

manjeet August 14, 2014 at 2:03 am

Hi
I am an NRI and has funds in HDFC NRO account from sale of my property in India. I would like to buy tax free bonds in India out of those funds. I am travelling to India for 1 week only. Can I open a DEMAT and trading account within a week and transfer funds from NRO account and but bonds?

Reply

HEMANT August 21, 2014 at 12:07 pm

Being NRI, PIS(portfolio investment scheme) account is compulsory to open trading & demat account in India. As you said you are keen interested to buy Tax free bonds. As for as current yield of tax free bond are showing around 7% to 7.30% which is not attrective rate for NRI.
Nowdays banks offer NRE deposit rate around 9.0-9.5% whis is also tax free. If all the papers will be ok we can open your account within a weak. Provide me your details on hemanttiwa@gmail.com to guide you in breif. If you are looking to invest money in Indian equity market(Share Market) Please inform us to +91-8097011135.

Reply

shankar September 11, 2014 at 7:37 am

Dear Hemant,

How are you doing, Need small information on Share.
My relative given little reliance infra share as gift and its transferred on my name.
How many days it will take to credit into my demat account..? and when can I sell.
Thank you in advance!!

Thanks & Regards,
Sankar

Reply

shankar September 11, 2014 at 7:39 am

Dear Mansu,
How are you doing, Need small information on Share.
My relative given little reliance infra share as gift and its transferred on my name.
How many days it will take to credit into my demat account..? and when can I sell.
Thank you in advance!!

Thanks & Regards,
Sankar

Reply

binod kumar September 25, 2014 at 5:32 pm

Sir I hav demat a/c of SBI ,I don’t know how to do traiding. Pls help me

Reply

SB September 29, 2014 at 1:49 pm

Hi Shiv, Currently many mutual funds are coming up with close ended equity growth schemes? What is your take on such schemes?

Reply

Leave a Comment

{ 5 trackbacks }

Previous post:

Next post: