Opening of A Demat account with Broker is a must for investors. Investors need to have accounts in three places-bank accounts, a trading account, and a Demat account. In this post, we will describe How to Open Demat Account across different banks in India.
What is a Demat Account?
A dematerialized or Demat account shares a lot of similarities with the regular bank accounts. The only difference with the Demat account is that it doesn’t hold liquid cash. The content is securities like shares, debentures bonds, mutual funds. A Demat account is like an alternative to hold securities in the form of physical certificates.
On the functionality basis, investors couple the Demat account with the trading account. It is through the trading account, all the investment in the stocks, IPOs, mutual funds, and even gold occurs. After that, the Demat account holds all the securities in the certificate form.
It is the depository participant (DP) that holds the security in the Demat account. There are two DPs – National Securities Depository Ltd (NSDL) and Central Depository Services India Ltd (CDSL). The DP that will hold your Demat account will depend on the collaboration options of your firm.
How to Open a Demat Account in India
Opening A Demat Account – The Entire Procedure
Before opening the Demat account, there are two terms that are of utmost importance—depositories and depository participants (DPs). The two Sebi registered depositories- NSDL and CDSL make it to the transactions in the market.
Besides, the depository participants serve as middlemen, who bridge the gap between investors and depositories.
About all, you’ll need to open an account with the DP to avail the facilities offered by the depositories. The account opening process is as similar as the bank account opening procedure. However, keep in mind that you need to select the DP based on the reputation, customer convenience, and charges levied. As per Sebi, the minimum net worth for a suitable DP is 100 Crores.
The next step is:
- Choosing a depository Participant. Usually, depository participants are financial organizations like banks, brokers, and other financial institutions.
- You can open a brokerage account Online for both trading and Demat account. However, you will need to sign the Power of Attorney (POA) in physical format.
- Fill up the entire form online along with the submission of the essential credentials.
- Then, the depository participants will conduct in-person verification.
- Once you are verified, the DP will issue one unique identification ID to access your online Demat account.
Generally, it takes about two weeks to open the account. You can also add beneficiaries to the Demat account.
list of necessary Documents for Demat Account Opening
Proof of Identity (POI)
- PAN card with a valid photograph.
- Unique Identification Numbers (UID) such as Aadhaar card or Driving license
Proof of Address (POA)
- Passport/Voters Identity Card/Ration Card/Registered Lease or Sale Agreement of Residence/Driving License/Flat Maintenance bill/Insurance Copy.
- Utility bills like Telephone Bill (only landline), the latest electricity or Gas bill.
- Bank Account statements
Proof of Income
- A photocopy of the Income Tax Return (ITR) along with the acknowledgment slip submitted to the Income Tax Department during tax filing.
- A Net Worth Certificate certified by a Chartered Accountant.
- Proof of Salary in the form of a recent Salary Slip or supportive documents to prove income or form 16.
After you have decided on the DP, you have to produce identification and address proof documents to SEBI. Apart from that, the PAN card is also essential at the time of account opening.
The agreement documents contain all the details of the rights and duties of the DP and the investors.
However, investors cannot open the Demat account directly with the depositories.
Demat Account Charges
Once you sign the agreement paper, you are levied for the charges in future transactions. While most of the DP doesn’t charge an account opening fee, there are some organizations that charge a fixed rate.
Apart from that, there are transaction fees, yearly maintenance fees, and conversion fees if you want to convert your physical certificates to the Demat format.
Of all the charges, the transaction charge is the one you should keep an eye on. Just keep in mind that you will pay for every buy and sale transactions. Therefore, you need to decide first whether you are going to buy more often or stay invested for a long time.
While there are various plans available with the DP, the basic one is the flat pricing plan. In this plan, irrelevant to the trade volume, the brokerage remains the same. For example, it can be 0.50 per cent or a minimum of Rs 25, on both buy and sell transaction values.
The other one is the volume link pricing where a brokerage keeps coming down as the volume of trade goes up above a specific limit.
For traders, most brokerages offer special pricing, which is based on floating funds and trading volume.
What is the fund flow procedure in a 3-in-1 account?
You open the cousin accounts altogether- trading and Demat account with a stockbroker to trade across various financial segments. There are multiple segments such as equity, derivatives, and currency trading.
The facility of opening a Demat plus trading account is provided by any stock broker-be it at full service or a discount.
When you trade regularly, there is consistency for three things:
- Money Deposits
- Immediate transfer through various opportunities
- Recurring payments
The fact is you always have to make sure that funds are there in the account. This is explicitly applicable if you are trading from a bank account. In that case, you will need to transfer funds on a regular basis lest your trading suffers a hiccup.
This is where the 3 in 1 Demat account appears. The upside points are :
- Hassle-free money transfer among accounts
- Great financial framework setup with less paperwork
- Savings account remains unaffected
Benefits of opening a Demat account in India
- You can open multiple accounts with different DPS with minimum share balance required to open.
- There are few hiccups when it comes to the safety of the shares, bonds, and debentures.
- Physical certificates come with the risk of wrong delivery, forgery, or theft. Demat account eliminates all of these.
- Electronic transfers or settlements are super easy and convenient with the Demat account.
- You can sell as many shares as you can.
Is it Okay to Open Multiple Demat/ Trading Accounts in India?
Yes, it is ok to open multiple Demat accounts, and it is entirely legal. Each person’s identity is mapped with one PAN card. As long as the pan card is connected directly with the Demat account, all the equities are your properties.
However, you have to open different Demat accounts with multiple brokers. You cannot open various Demat accounts with a single broker.
Further, you can also link that one Demat account with various trading accounts. For instance, if you have a Demat account at HDFC Sec, you can connect it to multiple trading accounts like ICICI Sec, Motilal Oswal, etc.
Few of the facts that require attention are:
If you plan to avail both discount and full-service broker facility simultaneously- You can open multiple trading accounts with different brokers and connect to one Demat account.
Many brokers don’t have the provisions of opening a single trading account. For a few, you have to open both Demat and trading accounts at the same firm.
What are the 3-in-1 Trading and Demat accounts in India?
ICICI Demat Account
With ICICI Direct, clients can trade on:
- Equity
- Mutual Funds
- Derivatives
- IPO
The ICICI Direct Brokerage Charges are:
- 1. Equity delivery: 0.55%
- 2. Equity Intratrade: 0.275%
- 3. Equity Futures : 0.05 %
- 4. Equity options: Rs 95/lot
When you open a Demat and Trading Account with ICICIdirect, You can buy and sell stocks on the online platform 100% cash at the time of the purchase. Brokerage charges depend on the amount and number of transactions. Investors can invest in mutual funds for over 2,000 mutual fund schemes online with safety and convenience.
One can access the research views on over 200 mutual fund schemes through the platform. Apart from that, investors can get a capital gains statement for investments at one click. For more information about various brokerage slabs, Visit the ICICI Direct Review page.
HDFC Demat Account
One of the leading DPs in India, individuals, get a waiver on the Annual Charges of Rs 750/- for the first year.
The HDFC Brokerage Charges are:
- 1. Equity delivery: 0.50%
- 2. Equity Intratrade: 0.05%
- 3. Equity Futures : 0.05 %
- 4. Equity options: Rs 100/lot
SBI Demat Account
SBI Cap Securities is operating the trading/ Demat account under “SBI Securities.”
The Services that offer include:
- Equity Investment
- Retail equity
- Derivatives
The SBI Brokerage Charges are:
- 1. Equity delivery: 0.50%
- 2. Equity Intratrade: 0.05%
- 3. Equity Futures : 0.05 %
- 4. Equity options: Rs 30/lot
Here is the complete review of the SBI Cap Securities and brokerage services.
Kotak Demat Account
A particular type of 3 in 1 account that integrates an Online Trading Account, Bank Account, and Demat Account on a single platform for your stock market transactions.
The Kotak Securities Brokerage Charges are:
- 1. Equity delivery: 0.50%
- 2. Equity Intratrade: 0.05%
- 3. Equity Futures : 0.05 %
- 4. Equity options: Rs 100/lot
Here is the complete review of the Kotak Securities and brokerage services.
Citi Bank
With the 3 in 1 Demat account, the dividends on the investment find a direct deposit in the account.
You can use IPIN of your internet banking to access your trading account on a laptop or desktop and MPIN for accessing your Demat account on your mobile.
Even though you cannot trade in holidays, access to the Demat account is 24/7 hours. You can have a detailed view of all the transactions you did on a specific stock.
There are two types of accounts available—Domestic Citigold, and Domestic Non-Citigold.
IDBI Demat Account
The investment facility available with IDBI Direct is trading in securities. A few other offers include Saving, and Demat Account, which are connected to an online trading account. With this facility, investors can trade in securities at a minimum price and get priceless investment advice.
It allows real-time fund transfers between your trading account and bank account.
Axis Demat Account
They offer integrated Trading-Demat-Bank Accounts.
There are two types of plans available with Axis Direct -Fixed Brokerage Plan and Variable Brokerage Plan.
The Axis Direct Brokerage Charges are:
- 1. Equity delivery: 0.50%
- 2. Equity Intratrade: 0.05%
- 3. Equity Futures : 0.05 %
- 4. Equity options: Rs 100/lot
Bottom line
You need to remember the basic rules of investing. The next big thing is you need to look to invest in equity for the long-term and not for the short-term gains as it’s a risky proposition. Make an informed decision and hold on to the shares until the reasons for which you had bought them have changed.
In our opinion, for a long-term investor, the brokerage charges hardly matter. However, for a trader, they should prefer trading with a Demat account with fewer brokerage fees. In the former case, the investor looks for a return that falls in the range of a couple of times of investment. In cases as such, few differences in the brokerage charges do not matter.
Do you already have a 3 in 1 Demat account with any of the above banks? If yes, we would love to know your experience with fellow traders in the comments.
Are you new to investment or trading? In that case, what is the main issue that is holding you back? If we have not covered here, we would love to know in the comment section.
On the final notes, we hope you get a general idea about opening a Demat account with different banks through this article.
