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Thursday, July 25, 2013

How to open a demat account?

With the opening of demat accounts the trading industry has seen quite an upsurge. For the ones interested in stocks, it is mandatory to have a demat account. The availability of this option for the traders to cut down on the paper work and make the process of buying and selling of shares and stocks easier to go with. The risks have also been cut down significantly if not completely eradicated.

The Securities Exchange Board of India has made it compulsory for any individual to trade in stocks and shares. You can open a demat account in any bank or brokerage firm. All the transactions can be done electronically. This is done with the help of the internet banking system. 

When you open a demat account you will be provided with a couple of passwords. This is done in order to provide an extra layer of security. The buy and sell of securities are done on the internet itself. You will need to furnish your internet password and also the transaction password. This is the biggest advantage associated with the demat account.

Here the steps that one needs to follow while opening a demat account:

1.    Visit a certified stock broker like ICICI, HDFC, Karvy or Sharekhan etc. Each of them varies in their charges levied for each transaction. 

2.    Grab hold of demat account opening form from them and fill it up. Ask them for any issues in the form. 

3.    The documents you will need to provide are your address proof and identity proof. You can furnish those documents that are listed in the SEBI guidelines. They are as mentioned below
i)     PAN card (Can be obtained at http://www.pancardonline.com/)
ii)    Identity proof – Passport / Voter ID card / Driver’s License / ration Card with picture
iii)   Recent passport sized photographs
iv)   Address proof – Electricity Bill / Voter ID card / Driver’s License / passport / bank statement / credit card with picture / telephone bill

4.    The most crucial document is your PAN card. This is a mandatory document that needs to be provided and has been made mandatory by the SEBI.

You will be given a beneficiary Owner Identification Number. An agreement will be signed between you and your DP. This will contain the rules and regulations that you need to follow. It will also highlight the charges that you will need to pay for trading with them in future. These charges can be changed by the DP. However in order to do so, you will be informed 30 days prior to the change being taken place.

The different charges levied upon you will be the following – 

1)    Account opening fee – Either this fee is optional or in case it is mandatory it will be refunded back to you once you close the demat account.

2)    Annual maintenance fee – this is an advance payment that is charged by the bank. It is a very nominal amount that is paid once a year.

3)    Custodian fee – the fee is charged based upon the number of securities in your possession. The higher the number the higher will be the custodian fee.

4)    Transaction fee –They can be a fixed percentage like 3% of the buy value or they can also be a fixed value irrespective of the value of the transaction. The second case is better. If the transaction fee is Rs 30 per transaction you pay 30 for an income of 50 or even 50000. But in case the transaction charge is 3%, you might have to shell out 1500 for a trade of 50000!

Opening a demat account is as easy as trading now. So don’t wait to trade, go now!

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