In the early days of the stock market, investors would hold shares as share certificates in physical form. Due to this, the share trading process was a tedious one to conduct on short notice. There were chances of the document getting destroyed, lost, forged, or faked.
The National Securities Depository Limited (NSDL) was founded in 1996 to overcome the limits and concerns associated with physical shares. It introduced the concept of demat accounts, which could electronically hold company shares and securities & help invest in stocks easily.
How can you open a demat account?
The demat account opening process is easy and hardly takes a few minutes.
Step 1: Select a depository participant (DP)
While opening an online demat account, you will need to select a depository participant.
Step 2: Complete the online demat account opening form
Download the demat account opening form and carefully go through the terms and conditions.
Step 3: Do your KYC as per the norms
KYC (Know Your Consumer) norms are a critical step. You will need to submit scanned copies of your identity proof, address proof, bank account statement, and income proof.
Step 4: In-person verification process
Complete the in-person verification process after submitting the form and the required papers to create a demat account. It is a mandatory exercise that verifies the legitimacy of your documents. Usually, personnel from your chosen financial platform/firm will contact you and set up a video call which you can attend via your smartphone or computer.
Step 5: Signing of the agreement copy
The next step in the demat account opening process is signing an agreement with your depository participant. It will state all information regarding the rights and duties of the DP and you.
Step 6: Receive your Beneficial Owner Identification Number
The DP will process your free demat account opening form once you have signed the agreement. Once approved, you will receive a unique Beneficial Owner Identification Number or BO ID. You can now access your online demat account with the BO ID.
After creating the demat account, you are now ready to invest in stocks, trade derivatives segments, ETFs, and listed bonds through share allocation. The procedure of allocating shares is relatively straightforward and may take place within minutes.