What is Demat Account
A demat account is an Indian term for a dematerialized account that holds financial securities (equity or debt) digitally and to trade shares in the share market. In India, demat accounts are maintained by two depository organizations: the National Securities Depository Limited and the Central Depository Services Limited.
A depository participant (DP), such as a bank, acts as an intermediary between the investor and the depository. In India, a DP is described as an agent of the depository. The relationship between the DPs and the depository is governed by an agreement made between the two under the Depositories Act. The demat account number is quoted for all transactions to enable electronic settlements of trades to take place. Access to the dematerialized account requires an internet password and a transaction password which allows the transfers or purchases of securities.
A security is a tradable financial asset; the term commonly refers to any form of a financial instrument, but its legal definition varies by jurisdiction. Purchases and sales of securities on the demat account are automatically made once transactions are confirmed and completed.
Types of Demat Account
There are three types of Demat Accounts:
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Regular AccountA Regular Demat account is a standard Demat account that Indian investors (who reside in India) use. SEBI recently introduced a similar Demat account known as Basic Services Demat Account (BSDA). The only difference between a Regular Demat account and BSDA is the maintenance charge. The maintenance charge of BSDA is zero if the amount is between ₹ 0/- to ₹ 50,000/- and a minimal amount of INR 100/- is charged if the amount is between ₹ 50,000 to ₹ 2,00,000. Every broker has to follow similar maintenance charges for BSDA
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Repatriable AccountNon-Resident Indians use this account, and it plays an active role in transferring funds abroad. The Repatriable account needs to be linked with the NRE bank account. However, repatriation depends upon the laws of the host country and the foreign country, and the transference of funds is possible if laws allow it and if the governments are not impeding the transfer process.
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Non-Repatriable AccountThis is a variant of Repatriable Account, and Non-Resident Indians also use it. However, funds cannot be transferred abroad through this account, and it needs an associated NRO bank account to function effectively.
Documents required for Demat account opening
To open a Demat Account without any hassle, you should have some essential documents. Listed below are the documents that's required to open a Demat account
- Identity proof with a photo. Aadhar card, PAN card. Driving License etc. are some of them.
- Residence proof. Registered lease agreements. passports, landline telephone bills, electricity bills, copy insurance, apartment maintenance bills, gas bills etc.
- Proof of bank account - Bank's account statement or passbook (shouldn't be more than three months old)
- Income Proof - Taxes or pay slips. It is compulsory for the currency and derivatives segment
