Physical possession of the certificates can often be a matter of concern so it’s better to store it at once in a dematerialized account. Shares and many securities are being saved for good in these accounts.
To open a Demat account all an investor has to do is register with an investment broker. Almost every shareholder is to have a Demat account for the purpose of transaction. This account is highly secured as it requires both internet and transaction password for its access, only then will the process of transaction be initiated.
Prime advantages of having Demat account
Among the host of security measures offered by Demat services, some of them are:
- Bonuses of the shares are credited on immediate measure in the demat account. There is no risk concerned with fire, theft and mutilation. Cost of transaction is usually less than those in physical segments.
- Problems caused by signature mismatch, loss of certificates and postal delays are avoided. A risk of damaged stock certificates and forgery is also eliminated.
- There is no need for paying for stamp since all these are electronically stored thereby it reduces the cost of transaction.
Basic goals of Demat system and its benefits
In India, the concerns for paper shares have been completely eliminated with the help of Demat account. This system was introduced back in Depository Act of 1996 and since then it has reduced significant amount of risk. So nowadays if an investor gets hold of a share he will have that amount credited in his account within 2 days. Some of the benefits of having a demat account are as follow:
- It’s easy and most convenient way for holding securities as it ensures immediate transfer of securities.
- There are no stamp duties on transfers of these securities.
- All the risks concerned with paper shares are eliminated. Risks of bad delivery, delays, thefts and fake securities are completely eliminated.
- Traders can now work for any given sectors
- Transaction cost can be reduced significantly along with need for excess paper works are also eliminated.
- There are no such problems related with odd lots.
- All the changes which are recorded in the address with Depository participants are applicable of getting registered with all companies where investors are not required to hold corresponding securities separately.
- Transmissions of all the securities are done with the help of depository participants and there is a need for notifying these companies.
- Automatic credit is conducted once the investor goes though the proceedings.
- With one Demat account; one can hold investments related to both debt and equity.
Steps of opening a Demat account
To open a Demat account do the following steps and it must be followed:
- The first and foremost step of opening a demat account is to approach depository participant followed by an agent of the concerned depository and filling up of opening form of the account. The list of the required DPs is available in numerous websites such as National Securities Depository Limited and Central Depository Services Limited
- Along with opening form of the account one must enclose their photocopies as proof of identity and also provide their address proof.
- Next one has to sign agreement with Depository participant in the prescribed standard format that will provide duties and rights of the investors along with the DPs. After completion of this step you are going to receive an agreement copy and get a schedule of charges for future transactions.
DP is going to open account and provide demat account number. It is known as beneficial owner ID. All the purchases are going to be credited in that account.