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Demat Account

OVERVIEW OF THE DEMAT ACCOUNT

Demat Account
Convenience

Demat account is the holding of stocks, shares and other securities in electronic form. Demat account has to be seen in contrast to physical holding of shares. In physical holding, the investor holds the securities in the form of a certificate with a unique folio number and unique distinctive numbers. For each company where the investor holds shares, the certificate will signify the ownership.

Simplicity

In contrast, demat account is about holding all your shares and securities in an electronic demat account. Like a bank account, the demat account will also operate on debits and credits. When you buy shares, you get credit of shares into your demat account and when you sell shares the shares get debited to your demat account.

Cost Effective

Since the shares are held in demat mode, the investors does not have to worry about loss of share certificates, mutilation of share certificates, loss in transit, physically sending requests for transfer, communicating for change of personal details etc for each and every share. In demat account, this change has to be only done once at the account level and then it applies for all shares in the demat account.

Demat Account
WHAT IS DEMAT ACCOUNT?

Demat account is where you hold shares and other securities in electronic form in the form of an entry in your demat account. A demat account can hold shares as well as other securities like bonds, ETFs, gold bonds, closed ended mutual funds , open ended funds etc. Demat account is a statement of ownership and the value of your demat account represents your wealth.

WHAT IS DEMATERIALIZATION?

Dematerialization is the process of converting your physical shares into electronic form. Today, over 95% of all share ownership is in demat form only and 100% of all trades happen only in demat mode. When you hold physical shares, you are first required to open a demat account with your DP after completing the required formalities. Once the formalities are completed, your demat account is opened and ready to use. In case you are holding physical shares, you can dematerialize them by giving application in demat request form (DRF) to your DP. The DP will first check the DRF is complete in all respects and then send the certificates to the registrar for verification.

The registrar maintains records of shares and securities on behalf of companies. For Karvy is the registrar for Reliance Industries. So, if you want to get your Reliance shares dematerialize, then your DP will send it to Karvy Registry office in Hyderabad. The registrar will first check that the shares are transferred and held in your name only. The names in the share certificate must precisely match with the name in the demat account; otherwise the DRF will be rejected. Then the registrar will check if the signature in the DRF matches with signature in the master record of the company. Lastly, the registrar will also check that the share certificates are not fake or duplicate. Once all these checks are completed the DP will get a confirmation from the Registrar. After the original share certificates are defaced and the equivalent number of shares are credited to you demat account. The entire process of dematerialization takes around 15-20 days before the credit comes into your demat account.

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DEMAT ACCOUNT FEATURES AND BENEFITS

Demat Account Features
  • Beneficial ownerWhen you hold shares in demat account you are the beneficial owner of these shares. Unlike in case of physical shares, you are not the registered owner of the shares, which is the depository; NSDL or CDSL. That is why your demat account is also called a BO account.
  • Security via DepositoriesOne of the concerns that any investors may have is what happens to their shares if the depository participant (DP) decides to wind up its business. The account is opened with a DP but the shares are with the principal depository; NSDL or CDSL. So security and safety of shares is assured.
  • Hold multiple asset classes Demat account is not just about holding equity shares but a number of other financial securities too. Demat account can hold equity shares, fully paid shares, partly paid shares, corporate bonds, government bonds, closed ended funds, open ended funds, gold bonds, index ETFs, gold ETFs etc. All these can be held in a single account itself.
Demat Account Benefits
  • Simple and cost-effective Compared to holding of physical share certificates, demat becomes a lot cheaper and also simpler. Holding all your investments in a single demat account is much better than managing files, folios, certificates etc. Also, there is no stamp duty on electronic transfer of shares, unlike in the case of physical certificates. Demat is also much faster.
  • No Bad delivery and duplicate shares Two major challenges in the physical holding mode was the problem of bad delivery and duplicate shares. Bad delivery would lead to rejection of delivery instruction on technical grounds and brokers used to have a large team only to handle bad deliveries. Since there are no physical certificates, there is no scope for either fake certificates or for duplicate certificates.
  • Automatic corporate actions This is one of the big advantages of demat holdings. Corporate actions like bonus issues, stock splits, mergers are called involuntary corporate actions which are automatically reflected in your demat account. In case of buybacks and rights, you need to exercise your choice and the rest of the credits are done automatically. Lastly, in case of dividends and interest, the record date is automatically calculated and the interest and dividend amounts are automatically credited to your bank accounts.

STEPS TO OPEN A DEMAT ACCOUNT WITH TRADEBULLS

Account
Opening
The first step to opening a demat account is to procure the DP form and fill it up. The form can either be downloaded from the website of Tradebulls or can be procured from any of the offices of Tradebulls.
Executing the
DP agreement
The second step is the actual filling up of the form and the execution of the DP agreement. The demat account represents an agreement between you and the DP acting on behalf of CDSL or NSDL. You are not only required to fill up all the details but also sign at various places in the demat account opening form. As a prudent customer you are required to understand the terms of the demat account including all charges as well as your rights and liabilities before you sign on the demat account agreement.
Document
submission
The final step is documentation. Your photograph and your PAN card are pre-requisites. Additionally, you are also required to give a proof of identity with photograph included (passport, Aadhar card, driving license, Voter card etc) and a proof of residence (government document with latest address, land line bill, electricity bill, water bill, IT assessment order, credit card bill etc). You must submit self-attested photocopies and carry the originals for verification. Alternatively, you can also avoid all these hassles by opening an online demat account via Aadhar authentication and OTP confirmation. Once the account is opened online, you just need to In Person Verification (IVP) once before you can start operating your demat account.
Demat Account HOW DOES DEMAT
ACCOUNT WORK?
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Demat Account DOCUMENTS REQUIRED TO
OPEN DEMAT ACCOUNT
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WHAT ARE THE DEMAT CHARGES

Demat charges may, inter alia, include the following:

Account opening charges

Power of Attorney (POA) charges

Dematerialization charges

Penal charges for rejection of DIS or DRF

Annual maintenance charges (AMC) billed each year

Charges for debit to the demat account

Rematerialization charges

Penal charges for delayed AMC payment etc.

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DEMAT ACCOUNT FAQS

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  • attention investors
"Prevent Unauthorized transactions in your Trading/Demat Account --> Update your mobile numbers/email IDs with your stock brokers/Depository Participant. Receive alerts/information of your transaction/all debit and other important transactions in your Trading/ Demat Account directly from Exchange/CDSL at the end of the day .......... Issued in the interest of investors." | "KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary." | "No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorize your bank to make payment in case of allotment. No worries for refund as the money remains in investor's account." |"Investment in Securities Market/Commodity Market is subject to Market Risk. | RGESS investors kindly download New Retail Investor Certificate from link - https://www.cdslindia.com/investors/rgessverification.aspx | Dear Investor kindly update Aadhar Number with your demat account, contact your nearest branch."
TRADEBULLS SECURITIES PRIVATE LIMITED
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