Steps To Follow For Opening A Demat Account

Many banks are taking out there IPOs and most of you must be interested in investing money in the IPOs that are coming up. For this you first have to have a "demat account".

A demat or dematerialised account holds shares in electronic form, thus saving you the bother of holding shares in paper form. Possessing a demat account is now a prerequisite for stock market investments.

You can open demat account in banks, financial institutions and stock broking houses. The broking houses in such cases also act as DPs (depository participants) intermediating between the depositories CDSL or NSDL and the investor. To open a demat account, first of all you have to submit an application to a DP and along with it submit required documents. Once you have a demat account to your name, you can open a trading account with a broker of your choice.

The shares bought and sold by you are reflected in your demat account. Any previously held physical share can also be dematerialized and transferred to the account.

The DP, at regular intervals, provides you with an account statement showing the balance of shares in your demat account and transactions during a period.

Following steps can help you open a demat account:

First of all you have to look for the institutions offering DP services. You have two options. Either you choose a bank/financial institution or a stock broker who could provide you the DP services as well. The factors that help you in the selection should be the charges and location convenience. The fees charged for DP services differ across the industry. Though the rates change, the charges normally categorized under the following heads:

Account openingfee

Annual maintenancefee

Transaction fee

Besides the above, depository participants also charge service tax as applicable. A bank or other DP might sometimes waive the initial account opening fees. It is better to choose a bank where you have been holding your savings account for long, then much of the paper work would get simpler and documentation will not take much time, as you are already known to the banker.

The Documents required opening a demat account:

A set of documents needed to be provided to the agent at the time of opening account are:

1. Duly completed account opening form and passport size photos;

2. A copy of PAN card as proof of identity;

3. Personalized cheque/Copy of the bank passbook

4. A copyof passport/voter ID/ ration card as a proof of address

Signing of the DP-investor agreement.

On submitting of the complete set of documents, the agent will complete the other formalities with the depository and facilitate opening of the account. You will be given a unique account number (BO ID- Beneficiary Owner Identity), which will serve as a reference number for all further transactions. After that you, must also collect delivery instruction (DI) slips from the DP. A DI slip has to be filled and sent to the DP on every delivery (sale of shares) you make. DI slip is an instruction to the DP to debit your account and credit the brokers account with the specific stock.

It is very important that the DI instruction should reach the DP the very next day after the sale, failing which the securities wont reach the broker and hence the exchange. This could result in auction of the security. For instance the exchange is able to procure those shares only at a higher price, and then the resultant loss has to be borne by you, as investor. If you have demat account as well with your stockbroker you can escape this irksome process of sending DIs, and give him a standing instruction (POA-Power of Attorney) for delivery of stocks that you sell.

Once you constrict down on a DP and get the documents ready, opening a demat account is very simple process.

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