| June 09, 2023
How to Open a Demat Account Online: A Comprehensive Guide
With the increase in the financial literacy rate and disposable income in India, there has been a steady increase in the number of Demat accounts in the economy. As per reports, the number of Demat accounts doubled between 2018 and 2021.
While in 2018, the number of Demat accounts were 359 lakhs, in 2021’s October stood at 738 lakhs, with a whopping surge of 187 lakh account just within a year, i.e. 2020-2021.
So, if you are wondering why there has been a sudden surge in the number of Demat accounts, the answer is pretty simple. People are becoming aware of different investment options, and to invest in any securities in the stock market, they need a Demat account for sure.
If you are also considering investing in securities like stocks, mutual funds, or bonds, you must open a demat account. Often people think opening a Demat account to be a tedious job; however, if you want to open a Demat account online, it will hardly take a few minutes.
In this article, you will find all the details about how to open a demat account online. However, before entering the account opening procedure, let’s explore a few What, Why and How’s of Demat account.
What is a Demat Account?
A Demat Account is known as a dematerialized account which is used for online stock trading. It holds financial securities like stocks and shares, mutual funds, IPOs, bonds, and Exchange Traded Funds (ETFs) in an electronic format. Apart from ensuring the security of your financial investments, a Demat account can also streamline the maintenance and management of the investments.
The clear purpose of having a Demat account is to convert physical shares into electronic shares and make it easier for users to trade them during online trading.
Since a Demat account is necessary to invest in the share market, you should know how to open a Demat account online. Remember that investment in the stock market opens doors to several financial opportunities and supports an individual's financial independence. So why keep your hard-earn money in savings when you can invest and grow through online stock trading?
How does it work?
A Demat account is mandatory when you buy and hold securities. So, a Demat account is opened with a brokerage house which is known as a Depository participant (DP) in official terms in the stock market.
The DP is the link between the depositories and the investor. In India, there are two depositories – National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). When a Demat account is opened, it is either under any of these two depositories.
Once you buy securities, the Depository will get the information from the stock exchange to release the specific number of securities. When it does, your Demat account will be credited with the securities you bought, and then it will be stored in it. When you sell securities, the reverse will happen, and securities will get debited from your Demat account.
Why do you need to open Demat Account Online?
The simplest and most secure way to safeguard your shares or assets is to have a Demat account. It protects your assets against loss, theft, damage, forgery, etc. With an online demat account, you can easily transfer the shares to your account digitally once the deal is authorized.
An online Demat account helps you trade using your computer or smartphone. Hence, you don't have to go to a stock exchange for deals. With no stamp duty included in the transfer of your shares, opening a Demat account online can save you cost in transaction fees.
How to Open a Demat Account Online?
Now let's understand the demat account opening process with the following steps –
- Firstly, you must find the most suitable DP or brokerage house for your trading and investment needs. For that, you need to see what services and products the DP offers and at what prices mean brokerage rate.
- Once you settle for a DP, then you have to look for the demat account opening form, which you can easily get on the website of the DP. Fill in the form with the required details like name, mobile number and city. Often on this form, you are asked to mention your PAN number, so keep that handy while filling the form.
- The next step in this demat account opening process is to add the bank details. It is a mandatory step as the bank account has to be linked with the Demat account for all the transactions both ways. The brokerage and other charges you will be paying will get debited from the account, while interest receivable, dividends, and sell price of the securities will be credited into the account. To add the bank account, you must provide the account number, IFSC code and account type, along with the branch's address in some cases.
Next, you have to upload documents which are required for KYC. The list of documents will include scan copies of –
- PAN Card
- AADHAAR Card
- Bank Account Statement, or Cancelled Cheque
- Proof of Income – Salary Slips or ITR
With minimal formalities, you can open demat account online with Findoc, just by uploading these documents. With the e-KYC facility, verification takes a few minutes, and your demat account can be opened within a few minutes. For e-KYC, you must have your mobile number linked to your AADHAAR.
As nowadays, the entire demat account opening process has become online for most DPs; the verification can also be done online by recording a short video of the applicant or via a video call with the executives of the DP. In the verification process, you have to tell about the details you have provided in the demat account opening form and the documents you have uploaded.
Nowadays, DPs are offering an e-sign facility to sign the final copy of the application and verify the same. It can be done using the AADHAAR Linked mobile number as well. It is easy, fast and secure.
Once all the above steps are done, you must apply and pay Demat account opening charges. However, nowadays, most DPs offer free demat account opening online.
Now, the DP will review the application, and if it is approved, you will get the login credential on your registered email id, and then you can access your Demat account and start trading.
What are the benefits of having an Online Demat Account?
A Demat account plays a crucial role in your investment journey. Have you seen some of the very famous Bollywood or Hollywood movies based on stocks and trading like The Wolf of the Wall Street or the recent hit Scam 1992, or Big Bull - well, all these movies will urge you to understand why and how stocks help you become more financially wealthy and independent!
However, there are four significant benefits of a Demat Account:
Assets in digital form
Whatever transaction you do, no paperwork is required. Your stocks and assets will be stored digitally. All the shares and securities purchased by you will be on the track record, and no one can steal those from you. Safe and secure.
Support the online ecosystem
The world is changing, and everything is going online. Trading in a digital form is exceptionally beneficial. No physical appearance is required; you can access every share and stock online. In seconds, you can view more than 50 listed shares. Seeing how the trading ecosystem has empowered people from all backgrounds is phenomenal.
You have a Demat account; you have organized data and updates on all your buys and selling stocks.
Easy to track
There is no way that you will lose track of your stocks and shares online through your Demat account. So, everything you need to know will be provided with details on your Demat account.
While you learnt how to open a Demat account online, the above points can help you with a hassle-free account opening process. Opening a Demat and Trading Account is similar to opening a new door to several opportunities financially!
With an online Demat account, you can start investing in Indian share market by consulting a trusted stock broking company in India. Since an investor can access the account from anywhere across the world, an online Demat account ensures you have convenient access anytime.