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Demat Account: Guntur P. Guru Prasad Faculty Member

This document provides information about Demat accounts in India. It explains that a Demat account dematerializes physical stock shares and holds them electronically. The shares are bought and sold through a stock broker. It is mandatory in India to have a Demat account to trade more than 500 shares. The document outlines the procedure to open a Demat account, documents required, and benefits such as convenience, reduced costs, and nomination facilities. It also discusses periodic account statements and how to build an investment portfolio through a Demat account.

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PUTTU GURU PRASAD SENGUNTHA MUDALIAR
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2K views

Demat Account: Guntur P. Guru Prasad Faculty Member

This document provides information about Demat accounts in India. It explains that a Demat account dematerializes physical stock shares and holds them electronically. The shares are bought and sold through a stock broker. It is mandatory in India to have a Demat account to trade more than 500 shares. The document outlines the procedure to open a Demat account, documents required, and benefits such as convenience, reduced costs, and nomination facilities. It also discusses periodic account statements and how to build an investment portfolio through a Demat account.

Uploaded by

PUTTU GURU PRASAD SENGUNTHA MUDALIAR
Copyright
© Attribution Non-Commercial (BY-NC)
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DEMAT ACCOUNT

INC
GUNTUR
P. GURU PRASAD
FACULTY MEMBER
Demat account
• Demat account, the abbreviation for
dematerialized account, is a type of
banking account which dematerializes
paper-based physical stock shares.
• The dematerialized account is used to
avoid holding physical shares: the shares
are bought and sold through a
stock broker.
Demat account
• This account is popular in India. The
Securities and Exchange Board of India (SEBI)
mandates a Demat account for share trading
above 500 shares.
• As of April 2006, it became mandatory that any
person holding a Demat account should posses
a Permanent Account Number (PAN), and the
deadline for submission of PAN details to the
depository lapsed on January 2007.
Procedure
• 1.Fill Demat request form (DRF) (obtained
from a depository participant or DP with
whom your depository account is opened).

• 2.Deface the share certificate (s) you want


to dematerialize by writing across
Surrendered for dematerialization.
Procedure
• 3.Submit the DRF & share certificate (s) to
DP. DP would forward them to the issuer /
their R&T Agent .

• 4.After dematerialization, your depository


account with your DP, would be credited
with the dematerialized securities.
The benefits
• A safe and convenient way to hold securities;

• - Immediate transfer of securities;

• - No stamp duty on transfer of securities;

• - Elimination of risks associated with physical certificates


such as bad delivery, fake securities, delays, thefts etc.;

• - Reduction in paperwork involved in transfer of


securities;

• - Reduction in transaction cost;


The benefits
• No odd lot problem, even one share can be sold;

• - Nomination facility;

• - Change in address recorded with DP gets registered with all


companies in which investor holds securities electronically
eliminating the need to correspond with each of them separately;

• - Transmission of securities is done by DP eliminating


correspondence with companies;

• - Automatic credit into Demat account of shares, arising out of


bonus/split/consolidation/merger etc.

• - Holding investments in equity and debt instruments in a single


account.
Required Documents
• The extent of documentation required to
open a Demat account may vary
according to your relationship with the
institution.
• If you plan to open a Demat account with
a bank, a savings, current and, or other
account for which the holder have been
issued a check book, such holder has an
edge over the non-account holder.
Required Documents
• In fact, banks usually offer additional incentives
to customers who open a Demat account with
them.
• Along with the application form, your
photographs (with co-applicants) and proof of
identity/residence/date of birth have to be
submitted.
• The DP s also ask for a DP-client agreement to
be executed on non-judicial stamp paper.
Here is a broad list:
• - A canceled check, preferably MICR
- Proof of Identification
- Proof of Address
- Recent photographs, one and, or more
• For proof of identification and, or address
• self-attested facsimile copies of PAN card,
• Voter’s ID, Passport, Ration card, Driver’s license,
• Photo credit card, Employee ID card, Bank attestation,
• latest IT returns and, or latest Electricity/Landline phone
bill are sufficient.
• While they only ask for photocopies of the documents,
they will need the originals for verification.
Beneficial Owner Identification
• Once the account is functional, the DP will
allocate you a unique Beneficial Owner
Identification (BO ID) to quote while making
transactions.

• While selling shares, provide the DP with a


delivery instruction, following which your Demat
account will get debited and payment for the
transaction will be made through broker/ sub
broker / bank.
Beneficial Owner Identification
• Similarly, while buying shares, you will
need to place an order for the shares by
quoting the BO ID. The shares will be
credited into your Demat account by the
DP.
• Payment towards the buying transaction
will be taken from your bank account.
Periodic statements
• The DP will provide you with periodic
statements of your stock holdings and
transactions. The charges for opening and
maintaining the Demat account differs with
DP s. A fair idea of comparative rates can
be obtained from the NSDL and CDSL
websites.
Build a healthy portfolio
• The Indian stock market today is on an
upward trend, with tremendous growth
opportunities in short and long term
investments. A Demat account could pave
the way for you to benefit from the current
stock market upsurges and build a healthy
portfolio for the future.
Build a healthy portfolio
• Let’s say your portfolio has 100 of Satyam, 200
of IBM and 120 of TCS shares. All these will
show in your Demat account.
• So you don’t have to possess any physical
certificates showing that you own these shares.
They are all held electronically in your account.
• As you buy and sell the shares, they are
adjusted in your account. Just like a bank
passbook or statement, the DP will provide you
with periodic statements of holdings and
transactions.
Why Demat?
• The Demat account reduces brokerage
charges, makes pledging/hypothecation of
shares easier, enables quick ownership of
securities on settlement resulting in
increased liquidity, avoids confusion in the
ownership title of securities, and provides
easy receipt of public issue allotments
Why Demat?
• It also helps you avoid bad deliveries caused by
signature mismatch, postal delays and loss of
certificates in transit.
• Further, it eliminates risks associated with
forgery, counterfeiting and loss due to fire, theft
or mutilation.
• Demat account holders can also avoid stamp
duty (as against 0.5 per cent payable on
physical shares),
• Avoid filling up of transfer deeds, and obtain
quick receipt of such benefits as stock splits and
bonuses.
Transacting in the secondary equity
market
• First open a Demat account
• Approach a broker with SEBI registration and
track record
• Ensure you are investing in companies that are
not delisted and not in Z group
• Keep a diversified portfolio
• Review the investments regularly
• Equity investment needs patience
• In the short run equity investment can be risky
INFORMATION WEB SITE

• www.DematAccount.com
• ON LINE GUIDE TO DEMAT, INDIA
Thank you

IN
C
GUNTUR

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