Any individual you designate to transfer your Demat account can manage the account by signing a power of attorney and submitting it to the depository participant. More than one person can hold a Demat account, but you must do it when you open the account. You cannot add or delete another person to an existing account.
What is a Demat account?
A Demat account is an electronic account in which investors and traders can store their securities for short or long periods. It is similar to a bank account, but a bank account allows you to store your money, but a Demat account allows you to keep your securities such as currency, shares, mutual funds, and much more.
Two well-known current depositories in India are National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL). They offer free Demat account opening services. Now, several websites regarded as trading and investing provide free online Demat account opening.
Individuals who want to enter the share market should open a free Demat account online, which will allow them to keep their stocks and securities safely and conveniently.
Who is a depository participant?
A depository participant (DP) is an agent of the depository institution through which it associates with the investor and provides depository services. The DP stores the securities as shares, government securities, bonds, mutual funds, debentures, and much more in an electronic form. It acts as a bridge between the companies that issue shares and their shareholders.
You cannot contact the depository directly. Only through the Depository Participant, a person can open and maintain a Demat account.
How to operate a Demat account?
The Demat account operates depending on its connection to two other accounts. It should be linked to both the trading account and the bank account.
Online trading or broking account:
Online trading or broking accounts are mandatory for an investor. An investor must open an online trading or broking account to trade on the stock exchange. As a result, the trading account and Demat account are required to be linked. All your trading account transactions are electronically copied and secured in your Demat account.
An investor’s shares are secured in a Demat account, and they make the actual purchasing and selling through a broking account. Hence, it is crucial to open a trading account.
Bank account and Demat account:
The bank account is used for crediting and debiting all amounts during transaction sharing. The bank account must be linked to the trading account and Demat account for successful records and transactions.
How to operate a Demat account online?
The operation of the Demat account is easy.
Selecting a Depository participant:
The first step in opening an online free Demat account is to choose a DP. Depository services are available in India through banks, stockbrokers, and online investment platforms. While selecting a DP, look for the service provider who fits your needs and specifications.
Fill in the Demat account opening form and submit it to the DP:
To open a Demat account, go to your DP’s website and fill in the Demat account opening form. Many depository members allow you to open free online accounts for Demat and depository.
Examine KYC guidelines:
After completing the Demat account application, you have to finish the know your customer (KYC) requirements. This includes the submission of scanned copies of KYC documents such as proof of identity, proof of address, bank account statement, and proof of income.
The DP may require an official in-person verification after receiving the documents.
Copies of the signing agreement: After the verification, you have to sign a contract stating all the DPs and investors’ responsibilities and rights.
BO identification number:
Once your application is granted, you will get a unique beneficial owner identification number (BO ID). This ID is employed to access your Demat account.