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

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 รขโ‚ฌโ€œ 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.

140 thoughts on “What is a Demat account and how can you open one?”

  1. Sir, i came to know that When the company is in profit it gives bonus shares for the long term share holders so here long term means how many months? Or wat should be the minimum time period of shares in order to get bonus shares or right shares?

  2. Hi manshu sir, i am very thankful for your information. I came to know many new things but can you plz tell me that, can a share be purchased and sold out on the same day?
    And whenever i sell a share will it accept or we have any restriction? plz suggest me sir.
    thank you

    1. Yeah, you can sell it the same day and that’s what intra – day trading is. The only restriction on sale is that you should actually own the share, if you don’t own it then at the end of the day the broker will automatically buy it on your behalf and square off the transaction.

  3. Hi Manshu,
    I am new to DEMAT a/c & trading business. Can you Plz tell me after opening my my DEMAT a/c, what should be my next step.??

  4. Hi,
    For Demat account, HDFC bank is advisable?
    what information should be known, before we start actual trading?

    Best Regards,
    Akshay Kumar

    1. Yeah they should be okay – most of these platforms are quite similar, and I haven’t seen a cost analysis done anywhere to see which is cheaper, so I feel it okay to go with any one of these big names.

      My advice would be to NOT trade as most people just end up losing money on it. Instead buy some diversified mutual funds and invest for the longer term.

  5. Hi,

    I want to invest in the share market, but i have no idea abt this. Can u plz suggest me, where can i get the basic information about ” how to invest in share”.

    I need some information as a beginner in trading.

    Kindly, help me out..

    1. If you have no idea then you’re better off staying away from trading since most people lose money on trading. This site is not meant for traders and I’m not a trader myself nor do I have any interest in it so you’re probably at the wrong place .Though as I said earlier, you should seriously rethink the whole plan about trading.

  6. Hi,

    i am interested to open a demat and trading a/c, need assastance which bank is good.

    waiting for reply

    m.ibrahim

    1. No I don’t have any recommendation on any banks – there is very little difference in one from the other and I have never looked at all the costs to see which is the cheapest. You will have to do a bit of research calling a few banks yourself and figuring out what prices they offer you.

  7. I am living in qatar (DOHA)
    I am intrested in opening new NRI acc.
    I want to know, hw many days it will take to open my NRI acc.
    let me also know, they provide me debit card or check book.at my india address or doha address (i am employer here)
    thanks.

  8. Hey guys
    Welcome to stock market, money must grow.
    Its a personal advise to all those who are new in the market and thinking of making big or even a small return. When you take calls for stock from the guy who have openend your account just make sure how much qualified is he and also do paper trading on his call so that you can track his performance. Otherwise I can gurantee you that your money will wipe out very soon and you will join the league of unsatisfied investor and never invest in the market again. This is what is happening in the market from a very long time.
    I can only advise you guys to just do paper trading for a month and see the performance of the stocks recommended by your Relationship Manager or Assistant Manager. If You find him good, then trade and make money.
    I have been thru this 2 years back. Now I have qualified myself and working with a broker to take calls and invest on my own. But ya like everone I make losses too. ๐Ÿ™‚

    Enjoy investing
    Puneet Raheja
    9953008576

  9. HI,
    I am assistant manager in kotak securities,anyone interested in opening a demat and trading account with kotak,which is a trusted brand in the market,please contact
    9920243001

  10. Hello,

    I want to know, the minimum amount with which trading can be done. I would like to start with low amount, as i will learn, i will invest more. But, tell me can we start with approx Rs 5000 or less amount to invest. Thanks

    1. I don’t want to sound defeatist or anything but most people lose money when they trade so you should be careful and start with only as much money as you are comfortable losing – 5k is big enough.

  11. Sir ….i am a new comer in this arena and wanna open demat and trading a/c…what combination of DP u should hav choosed if u were in my position?

    1. I would have chosen the DP and trading account of the bank that I already have a relationship with which is what I did also when I opened my account with ICICI Direct.

      1. Sir, i have salary a/c in hdfc bank, recently they asked me for dmat a/c , and i accepted but they didnot discussed with me anything about anual or other charges . so plz tell me what will i do , my a/c request is underprosses..

  12. dear sir
    I am very new to share market but going through your views i think that you made me , under stand every thing TO i open a Demat A C Which bank will will be cheaper

  13. Thank you so much fo ryour reply …i really appreciate it.
    Mr. Manshu, pls can u advise me if i dont ve share certificate for SBI mutual fund scheme but i ve the details like policy no: etc how do i proceed to make it electronic shares without certifcate.
    awaiting ur kind reply
    Regards SONA

  14. Demat a/c refers to a dematerialised account.
    It is similar to a bank account where actual money is replaced by shares.
    It is needed when you purchase shares from the secondary market or apply for an IPO.

    You have to approach a Depository Participant or a registered sub broker to open your demat a/c(remember, they are like bank branches)

    Goldleaf Investments
    022 65504550

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