DEMAT ACCOUNT

BY:- Alain, Amit & Kashish

BCOM(H)
CMR UNIVERSITY

INTRODUCTION

In India shares and securities are held electronically in

a dematerialized. A Dematerialized account is opened
by the investor while registering with an investment
broker (or sub-broker).

Every shareholder will have a Dematerialized account

for the purpose of transacting shares.

Access to the Dematerialized account requires an

internet password and a transaction password.
Transfers or purchases of securities can then be
initiated.

ADVANTAGES OF
DEMAT

The bonus/right shares allotted to the investor will be

immediately credited into his account. There is no risk
due to loss on account of fire, theft or mutilation.

Transaction costs are usually lower than that in the

physical segment.

A demat account also helps avoid problems typically

associated with physical share certificates.

For Example:- delivery failures caused by signature

mismatch, postal delays and loss of certificate during
transit. It eliminates risks associated with forgery of
signatures.

BENEFITS

Easy and convenient way to hold securities

Immediate transfer of securities

No stamp duty on transfer of securities

Safer than paper-shares (earlier risks

associated with physical certificates such as
bad delivery, fake securities, delays, thefts
etc. are mostly eliminated).

Reduced paperwork for transfer of securities.

Reduced transaction costs.

BENEFITS TO THE
COMPANY

The depository system helps in reducing the

cost of new issues due to lower printing and
distribution costs. It increases the efficiency of
the registrars and transfer agents and the
secretarial department of a company. It
provides better facilities for communication
and timely service to shareholders and
investors.

BENEFITS TO THE
INVERSTORS

The depository system reduces risks involved

in holding physical certificates, e.g., loss,
theft, mutilation, forgery, etc. It ensures
transfer settlements and reduces delay in
registration of shares. It ensures faster
communication to investors. It helps avoid
bad delivery problems due to signature
differences. No stamp duty is paid on transfer
of shares. It provides more acceptability and
liquidity of securities.

BENEFITS TO THE
BROKERS

It reduces risks of delayed settlement. It

ensures greater profit due to increase in
volume of trading. It eliminates chances of
forgery or bad delivery. It increases overall
trading and profitability. It increases
confidence in their investors.

OPENING A
DEMAT ACCOUNT

Getting in touch with a registered depository: In

order to open a demat account, youll have to first get
in touch with a registered depository participant (DP).
For a list of registered DPs, visit the NSDL (National
Securities Depository Limited) or CDSL (Central
Depository Services Limited) websites.

Download the Forms: Download or collect the

account opening forms from the respective DPs office
or website. Fill up the requested details in the account
opening form and provide the necessary signatures.
Affix photographs and submit a copy of PAN Card, proof
of address, bank statement or other documents as

Wait the turn-around Time: It usually takes about a

week or two for the welcome kit to reach you
depending on different company policies. A Demat
account can be opened with zero balance in your
account. There is no compulsion to maintain a
minimum balance either.

Nominate your Nominee: It is important that you

add a nominee while applying for a demat account.
Check and double check the nominee details for
accuracy. This will enable the nominee to receive the
benefits of your securities in the event of exigencies.

Trade: Similarly, when you want to buy

shares, inform your broker. The shares that
you bought will be credited into your account
by the DP. You can also use the trading
account linked to your demat account to buy
and sell shares online. The DP will provide
periodic statements of your transactions.

DEPOSITORY
PARTICIPANT

A depository (in simple terms) is an institution

holding a pool of pre-verified shares held in
electronic mode that offers efficient
settlement of transactions. A Depository
Participant (DP) is an intermediary between
the investor and the depository. A DP is
typically a financial organization like a bank,
broker, financial institution ETC.

FEES INVOLVED

ACCOUNT OPENING FEE: Depending on the DP,

there may or may not be an opening account fee.
Private banks, such as HDFC Bank and AXIS Bank,
do not have one. However, players such as Kotak
Securities, Sushil Finance, ICICI Bank, Globe Capital,
Karvy Consultants and Bajaj Capital Limited do
impose an opening fee.

EXAMPLE: To open a demat account in SBI, a One time charge

is applicable of Rs. 2500/-. To open a Trading Account it is Rs.
500/Reporting Charges on transaction per script: 0.5%
One time approval for PIS: Rs. 750/-

ANNUAL MAINTANENCE
FEES

This is also known as folio maintenance

charges, and is generally levied in advance. It
is charged on annual or monthly basis.

EXAMPLE: IN SBI, The annual maintenance fee is

Rs. 1000/-

TRANSACTION FEES

The transaction fee is charged for

crediting/debiting securities to and from the
account on a monthly basis.

Stock Holding Corporation has charged Rs

25/- as request fee and Rs. 3/- per certificate
as variable fees. SBI has charged on the
variable fee.

DP(depository participant) also charges fees

for converting shares from physical to
electronic & vice-versa.

Disadvantages
OF DEMAT

Trading in securities may become uncontrolled in case of dematerialized securities.

It is incumbent upon the capital market regulator to keep a close watch on the
trading in dematerialized securities and see to it that trading does not act as a
detriment to investors.

For dematerialized securities, the role of key market players such as stock-brokers
needs to be supervised as they have the capability of manipulating the market.

Multiple regulatory frameworks have to be conformed to, including the

Depositories Act, Regulations and the various Bye-Laws of various depositories.

Agreements are entered at various levels in the process of dematerialization.

These may cause worries to the investor desirous of simplicity.

There is no provision to close a demat account, which is having illiquid shares. The
investor cannot close the account and he and his successors have to go on paying
the charges to the participant, like annual folio charges etc..

After liquidating the holdings, many Indian investors don't close their DP account.
They are unaware that DPs charge even on dormant accounts.

DOCUMENTS
REQUIRED

PAN (Compulsory)

Bank statement (last 3 months)

Address Proof

Income Tax Return

Two color photos

Bank crossed Cheque (If required)

KYC details