7 Steps to open a Demat account
Dematerialized account, commonly known as a Demat account, is an electronic account used for holding and trading securities. The account electronically holds shares, bonds, mutual funds, and other securities. It is essential to have a Demat account to invest in the Indian stock market. This article will discuss the steps of a Trading account.
Step 1: Choose a Depository Participant (DP)
The first step towards opening a Demat account is to choose a depository participant (DP). A depository participant is an agent authorized by the depository to offer Demat account services to investors. The two central depositories in India are the National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL). In addition, many banks and stockbrokers also offer Demat account services, and one can choose a DP based on their convenience.
Step 2: Collect the necessary documents
The investor must provide a few documents to open a Demat account. The required documents may vary from one DP to another, but the following documents are generally required before you get the answer for how to open a trading account:
- PAN card
- Aadhaar card or any other identity proof
- Address proof (electricity bill, telephone bill, bank statement, etc.)
- Passport size photographs
- Income tax returns or Form 16 (in case of trading in derivatives)
Step 3: Fill out the account opening form
After collecting the necessary documents, the investor must fill out the Demat account opening form. The form can be downloaded from the DP’s website or their office. The form requires personal details such as name, address, contact details, etc. Therefore, the investor must fill out the form carefully and double-check all the details before submitting it.
Step 4: Submit the documents
The next step to open a trading account is that the investor must submit it and the necessary documents to the DP. The documents can be submitted physically or uploaded on the DP’s website. Then, the DP verifies the records and approves the account opening request. Depending on the DP, the verification process may take several days to a week.
Step 5: Sign the agreement
After the account opening request is approved, the investor must sign the DP agreement. The agreement contains the terms and conditions of using the Demat account, such as the charges, fees, and services offered. Therefore, the investor must read the agreement carefully and sign it only if they agree to the terms and conditions.
Step 6: Link the bank account
After the agreement is signed, the investor must link their bank account with the Demat account. The DP provides a form for linking the bank account. The investor needs to fill out the form with the bank account details, and the DP verifies the details with the bank. Once the bank account is linked, the investor can transfer funds from the bank account to the Demat account for trading purposes.
Step 7: Get the account details
After completing all the above steps, the investor gets the Demat account details, such as the DP ID, client ID, and password. The DP ID is a unique identification number of the DP, and the client ID is a unique identification number of the investor. The password is used to access the Demat account online. The investor must keep these details safe and secure as they are essential for trading and accessing the account.