How to Open A Demat Account?
An important step to understand in dematerialization is how to open a demat account.
Dmat account opening involves some basic steps and if all your documents are in
place then your demat account will be opened in a couple of days. Here are some
very important steps that you need to keep in mind while opening a demat account.
Step 1: Identify your DP to open a demat account…
You can make your choice of DP based on features offered by the DP, the demat charges
involved, proximity to your home or office etc. Normally, your broker will
open your Trading-cum-Demat account. From a logistical point of view, it
is always better to have your trading account and demat account with the same broker.
This will make your demat process a lot quicker, especially when it comes to issuing
debit instruction slips (DIS) for the sale of shares.
Step 2: Documentation and procedure of opening a demat account…
Two basic documents that are essential for opening a demat account are your proof
of identity and your proof of residence. Even before these requirements, your Income
Tax PAN card is a must for opening a demat account. Brokers accept a variety of
documents as your proof of identify including passport, Aadhar card, elector voting
card, pension card etc. For your proof of address, you can submit your passport
if updated, latest landline telephone bill, property tax assessment, income tax
assessment, credit card bill, electricity bill etc. All these documents must be
submitted as a self-attested photocopy and supported by originals for verification.
Step 3: Signing and executing the DP agreement …
Once you have submitted all the relevant documents, the next step is to sign and
execute the DP agreement. Each DP will have its own agreement format which is broadly
defined by SEBI. There are multiple signatures that you will have to affix and it
is a long list of rights and obligations of the demat account holder. It is advisable
that you read the fine print in detail because, more often than not, the devil lies
in the details. The agreement will also provide a schedule of charges and you are
required to go through in detail. It is essential that you read the fine print of
the contract and get answers to your questions from the DP.
Step 4: Actual DP account opening…
Once the documents are all submitted and the agreement is executed properly, the
DP will take a couple of day’s time to verify the documents and get the compliance
approval. Once the compliance approvals have been received your account will be
opened. The DP will then allot you a Beneficial Ownership code (BO) which will be
your account number. Your full DP account number will be a combination of your DP
id and your BO code. Your DP code must be mentioned in the same manner at the time
of applying for the IPO.
Step 5: Signing a power of attorney (POA) for online debits and credits to demat…
This is the last step. Normally, when you sell shares from your demat account you
are required to give your debit instruction slip (DIS) to the broker on the same
day. Otherwise it could go into auction. But this becomes a hassle for regular traders.
To overcome that you can execute a Power of Attorney (POA) in favour of your broker
and from that point your DP account will be automatically debited when you sell
Digital demat account opening using e-KYC…
Let us also understand how to open demat account online. Brokers are now permitting
authorization and opening of your demat account using Aadhar Card. You just need
to ensure that your Aadhar card is mapped to your bank account and the mobile number
you are giving for the Demat account is the same as the one you have given for your
Aadhar. The entire authorization (via OTP sent to your mobile)and account opening
can be done through Aadhar authentication with only your PAN card copy and a cancelled
cheque to be scanned and uploaded online. As a last step, you are still required
to do a second level of verification. This can either be done by video camera fitted
on your PC or through an in-person-verification (IVP) at the nearest customer point
of the DP.