Procedures To Be Followed In Opening A Demat Account

Most banks have taken out their IPO’s and you might be interested in investing in IPO’s that are making way into the market. In order to do this you need a Demat account. A demat account signifies dematerialized accounts where shares are held in electronic form rather than in paper form. For stock market investments demat account is a pre requisite.

Before we proceed we need to understand on how to open demat account. The account can be opened with financial institutions, banks or stock brokers. Before you go on to open a Demat account you need to submit application to DP with the given set of documents. Once a demat account is ready, then it becomes easy to open a trading account with a broker of your choice. Any shares that are brought by you would be reflected in the DP account.

The series of steps are as follows

To start off the process you need to locate financial institutions that offer DP services. A couple of options are there. You can choose a financial institution or bank or a stock broker who provides DP services. The factors influencing your selection would be location convenience and charges. Charges for DP differs across industry. Irrespective of the rates change, charges are divided under the following sub heads

  • Account opening fee
  • Transaction fee
  • Annual maintenance

In addition depositary participants charge service tax as applicable. The DP or bank in some cases is going to wave off the initial account opening charges. It is better to choose a bank where your savings account has been existing for a considerable period. The reason being that the documentation and paper work would not take much time since the banker is already known to you. The list of documents needed to open a demat account are as follows

  • An account opening form duly signed with passport size photographs.
  • For proof of identity your PAN card copy
  • Your personalized cheque or copy of the bank passbook
  • A valid identity proof for your address

On submission of the required documents, agent is likely to comply with all formalities with the depository and open the account. An account number unique which is a beneficiary owner identity will be provided to you.  This is going to serve as a reference for all future transactions. Then from DP you need to collect delivery instructions slip. When you make delivery of shares every time you need to fill DP. This slip is an instruction to the DP which would debit your account and credit account of your broker with a specific stock.

The DI instruction needs to reach DP on the very next day of a sale. If not done, securities are not going to reach the broker and hence exchange will not take place. It could lead to an auction of the security. The exchange would be able to secure shares at a high price and any loss which is resulting has to be borne by the party.

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