A demat account (short for “dematerialized account”) is an account to hold financial securities (equity or debt) in electronic form. In India, demat accounts are maintained by two depository organisations, National Securities Depository Limited and Central Depository Services Limited. A depository participant, such as a bank, acts as an intermediary between the investor and the depository.
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. Transfers or purchases of securities can then be initiated. Purchases and sales of securities on the dematerialized account are automatically made once transactions are confirmed and completed.
DEMAT accounts can be opened through almost all nationalized banks as well as brokers. Different DEMAT accounts are required for all the exchanges, so the first step is to decide the exchange in which you would like to trade. NSE and BSE are the two most prominent stock exchanges in India.
Each exchange has an individual depository, where DEMAT account is opened. You cannot directly approach a depository and is thus opening of DEMAT account is generally done either through your bank or broker. The purpose of DEMAT account or dematerialized account is to store the securities which are bought from the market by the investor in dematerialized form.
Some Of the DEMAT account providers in India are as follows:
1. 5 Paisa
5 paisa is a discount broker, which charges one of the lowest brokerage charges amongst all the discount brokers. It is promoted by IIFL, which is a premier NBFC based in India, established more than two decades back.
There are no upfront charges for opening a Demat account, but a maintenance charge of INR 45 per month is charged.
2. Zerodha
Based in Bangalore, Karnataka, Zerodha was the one who introduced the concept of discount brokerage in India, which made one of the largest brokers of the country. The advantage with Zerodha is that they do not charge any brokerage on delivery-based trades, whereas a fixed charge of INR 20 is charged for all executed orders of intraday and derivative trading.
The Demat account opening process is paperless and can be performed online very easily in less than 15 minutes. There are no account opening charges but an annual maintenance charge for Demat is charged second year onwards.
3. Upstox
The main competitor of Zerodha working on the same concept of discount brokerage is Mumbai based Upstox. It was initially known as RKSV securities and the brokerage plans are mostly identical to those of Zerodha. Demat account can be opened online and there are no charges for account opening, however, an annual maintenance charge of nominal 150 INR is applicable for second year onwards.
4. Sharekhan
Established in 2000, it is one of the premium brokers of India. ShareKhan has a customer base of over 16 lakhs with a spread across all the towns and cities of India. BNP Paribas group has acquired SHareKhan in 2016 for INR 2200 Crores. They charge a minimum brokerage of 10 paisa per share.
There are no Demat opening charges charged by ShareKhan whereas a fixed Demat maintenance charge of INR 400 is charged from the second year.
5. Motilal Oswal
A very prestigious name in the Indian stock market, Motilal Oswal was established in 1987. They provide multiple services including Demat accounts, portfolio management, home finance, investment banking etc. They have a clientage of over 9 lakhs and are present in over 2200 locations across India. They provide an integrated 3-in-1 account where trading account, Demat account and savings account are integrated as 1 unit.
They don’t have any charges for account opening but a annual maintenance charge of 441 is charged towards all Demat account holders from second year onwards.
6. ICICI direct
ICICI direct is a familiar name because it was the one who popularized the concept of online trading in India. They used to be the largest stockbrokers of India, until Zerodha overtook them. They have a client base of over 20 lakhs and have been one of the most expensive stockbrokers of India.
They charge an account opening fees of 975 and an annual maintenance charge of INR 700 annually from the first year itself.
7. HDFC Securities
Established as a brokerage division of the largest public sector bank of India – HDFC, it was established in the year 2000. They serve over 17 lakh customers from over 185 locations in India with a branch count of over 2500. HDFC hold a good reputation in the banking sector and the same is utilized by HDFC securities.
They charge a trading account opening fee of INR 999 and Demat account maintenance charges of INR 750 annually from the first year.
These are few Demat account providers of India, there are many more such as HDFC securities, Indira securities, Angel Broking etc. which offer good service at competitive rates.
The DEMAT account is nowhere involved in the monetary transactions in case of any market or market segment. The sole purpose of a DEMAT account is just to store all the securities and instruments in dematerialized form at one place. The DEMAT account can never hold any money, and all the money related transactions are usually processed directly from the trading account.
You can have a total value associated with your DEMAT account in some cases, which is actually the total value of all your securities stored in that account and does not mean that there is any cash balance in your DEMAT. All profits and losses associated with trading are directly settled to your trading account from where they can be transferred to your bank account as per your need.
Conclusion
Inception of DEMAT accounts has transformed the stock market trading experience by making the clearing and settlement process reliable and fast. There is a common myth associated with DEMAT that there needs to be certain amount of cash funds in your DEMAT for trading which is incorrect. DEMAT account can hold and store nothing apart from dematerialized securities. It is necessary to brush up your basic concepts before you start trading and investing in the market. It is better to take services from a certified investment advisor, if you don’t have experience with the stock market basic terminologies.
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