Demat Account : Most Frequently Asked Questions

January 24, 2014

share trading

It’s true that it’s almost impossible to invest in the stock market without a demat account. Yet, you are clueless about the various charges or the term itself. The concept of owning stocks and shares in the physical form is passed over. The era of having physical shares to trade in the stock market are long gone. Trading in the stock market today is almost synonymous with online trading or having a demat account. With a dematerialised account in your pocket, it’s possible to hold stocks and shares electronically transact online in shares.

Consider having a demat account similar to that of a bank account. The currency of this account is shares instead of money. So, it’s obvious that you will need to open a demat account in order to trade in stocks and shares. Here are some of the most commonly asked questions pertaining to the demat account.

Opening a Demat Account and its operations

Q: Is it necessary to have a demat account?

A: Yes, it’s extremely important to have a demat account in order to trade in any shares or securities. Whether it is trading in IPOs, gold ETFs, and other types of mutual funds or pure stocks, trading in the stock market requires a demat account.

Q: How does one open a demat account?

A: It’s simple. Fill in the demat account opening form online or at any bank branch nearest to you.

Q: What are the documents required for opening a demat account?

A: Ensure that you have valid proofs for your proof of identity (POI) and for proof of address (POA). POI proofs are usually passport or PAN card. POA can be in the form of your electricity or telephone bill or a bank statement.

Q: I have physical shares, how should I transfer them to my demat account?

A: Send your request to dematerialise the physical shares to the concerned DP. It’s important to open the account in the name mentioned on the shares and stocks.

Q: How different is a demat account from a bank account?

A: The two are different from each other. In some cases, banks act as a depository participant where one can open a demat account. We look at the difference between bank accounts and demat accounts below:

Bank Account

Demat Account (Depository Account)

Holds funds or money for the account holder

Holds securities and shares for the accountholder

One can transact funds from one account to the other

One can transact securities from one account to the other.

Facilitates the transaction of money without having to handle them physically

Facilitates the transaction of securities without having to handle them physically

Ensures that money is safely stored

Ensures that the securities are safely stored

One cannot transfer securities into this account

One cannot transact money in this account

Bank account fees and charges are applicable

Demat account fees and charges are applicable.

Q: How can one transact shares in a demat account?

A: This is quite easy. One needs to simply give the instruction to the bank for the transfer of the shares. You will need to give an off-market instruction to the requisite depository participant (DP). Physical shares from another’s account cannot be transferred directly into the demat account.

Q: How does the dividend form the shares come to my account?

A: For this, you will need to ensure that you link your bank account with the demat account in order to get the dividend directly transferred to your account.

Q: Is it possible to have more than one demat account?

A: Yes, one can hold more than one demant account.

Q: Is it possible to ask someone else to operate the demat account of my behalf?

A: Yes, one can request a person to operate the demat account on behalf of them with a power of attorney letter stating this.

Information on Dematerialisation

Q: I want to dematerialise all my securities in this account. Can I do so?

A: Yes, this is possible. You can dematerialise all your shares within this account provided the names on the shares are the same as the account holder.

Q: What is an ISIN number?

A: ISIN or International Securities Identification Number is a 12-digit alpha-numeric number that is uniquely applied to each share. One needs to mention these unique numbers in order to transfer these shares. Each dematerialised share gets a unique ISIN number.

Trading/Settlement

Q: How different is a brokerage/trading account from a demat account?

A: A demat account is only an account that holds the securities whereas with the aid of the trading account one can proceed with trading in the stock market. The relevant brokerage fees and charges will be applicable to that account.

Q: Can one link the trading account with several demat accounts?

A: Yes, it’s possible to link several demat account that holds several securities with one trading account.

To get answers on more such demat account related faqs click here

Author Box

Kotak Securities Ltd is one of the oldest and largest stock broker in India. We offer you investing facilities in various instruments like equities, derivatives, currency derivatives, Mutual Funds and IPO, through our branches and the internet. In addition to this we have a full-fledged Research Team with years of experience in the industry. Visit www.kotaksecurities.com for more information

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