What is Demat Account? Demat is the account through which purchases are made in the share market, it is necessary to have a PAN card to open it, it is linked to your bank account.
What is Demat Account Overview
| Investment Type | Benefits of Demat Account |
|---|---|
| Shares | Eliminates physical handling and maintenance of paper shares. |
| Bonds | Streamlines the process, reducing paperwork hassles. |
| Government Securities | Facilitates easy and secure holding without physical documents |
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Until a few years ago, if you used to buy shares of a company, it would send you its papers which were proof that you had bought the shares of that company and when
You used to sell the shares of that company, then you used to send that paper to the company’s office, then the company used to see what was the share price when you sold the shares, then it used to give you the money which takes a lot of time.
Now everything is done with the help of computer, as soon as you bought the share, it will come in your account within a short time and as soon as you sold the share, your money will be sent to your bank account.
Who opens demat account?
Are these two institutions responsible for opening a demat account in India?
National Securities Deposit Limited (NSDL) and Central
Deposit Services Limited (CSDL).
There are more than 500 agents of these deposits who are called Deposit Participants (DPs). It is not necessary that the DP should be any bank. Demat account can also be opened with other financial institutions (like Share Khan, Reliance Money, India Infoline etc.).
It is important to know that people who do not buy and sell shares themselves, their brokers can use the account as a representative. These brokers get some fees for buying or selling your shares. Sometimes some brokers make this profit without you Asks sell your shares, so you should be careful while choosing your broker and if you and your broker have a fight on something, then you can complain about it in SEBI.
The DP charges various fees from the person opening the demat account. This fee may differ from company to company.
Account opening fee
Fees charged for opening an account. Some companies (like ICICI, HDFC, UTI etc.) do not charge this fee. While some (SBI and Karvy Consultants etc.) charge it. By the way, some companies also keep it refundable (given on account closure).
Annual Maintenance Fee
Annual fee, also known as folio maintenance charge, usually this company takes the fee at the beginning of the year itself.
Custodian Fee
The company can take it every month or in one go, this fee depends on the number of shares you have.
Transaction fee
The DP can choose to charge it on every transaction or on the amount traded (fixing the minimum fee).
Apart from these the company
Re-Mat, De-Mat, Pledge Charges,
Can also levy field instruction charges etc.
Another question arises in the mind. Can you close a demat account and open a new
Account with another broker?
Yes, This can be done if you feel that your broker is charging more than you, then you can close your account with him and open a new account or you have been transferred somewhere where your broker gives you its convenience. You can do this even if you are not able to give, it depends on you why you want to do this.