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Everything you wanted to know about Demat Account

  • Published: Thursday, 15 October 2020

In 2016, the demonetization policy changed the way we buy and sell things. It was a step towards making India a cashless economy. Similarly, 20 years before demonetization, India witnessed the Dematerialization phase.



In 1996, a step was taken to free the stock market of physical share certificates. Back then, shares were sold in physical form. If you wanted to buy a share, you paid cash to the trader and got a certificate. Imagine the amount of paper each investor had! Encashing these stocks was also time-consuming. The dematerialization policy aimed to convert the physical certificates into electronic form and simplify the process.


What is a Demat account?

Just like a bank account holds money, a Demat account holds shares, mutual funds, bonds, government securities, and electronic traded funds (ETFs). Every time you buy a share, it is credited to your Demat account and vice versa. It is mandatory for every investor to have a Demat account.


Role of a depository

India has two depositories: NSDL and CDSL. They hold the details of all the Demat accounts in India in electronic formats. You can open a Demat account with any of the two depositories. They facilitate the buying and selling of securities.


Role of a depository participant (DP)

Once you have finalized a depository, you can open a Demat account with any of its DP. A DP is like a retailer. For example, you want to buy a Nestle's Maggi or Cadbury’s Dairy Milk. You will not visit the office of Nestle or Cadbury. You can buy these products from a local supermarket or grocery store. Similarly, you can open an account to be able to transact in securities with a DP. It could be an NBFC or broker or a bank. SAS Online is a reputed DP that facilitates online transactions in the stock market.


How to open a Demat account?

  1. Select a DP:  Choose the one that offers good services. You can also select a DP that offers online services like SAS Online by visiting the site
  2. Application:  Submit a duly filled Demat account opening form along with copies of KYC documents. These include PAN Card, proof of address, proof of identity, and bank account details.
  3. Documentation:  On submitting all the documents you receive a copy of rules and regulations and the charges you would incur. A copy of the terms of the agreement is also submitted.
  4. Verification:  A personnel from DP will visit you in person or call you to verify all the information furnished to them.
  5. Account number:  On successful completion of the verification, you will get a unique account number and ID from the DP.


You can now operate your Demat account online. You are liable to pay an annual maintenance fee and a transaction fee.


Benefits of Demat account

  1. Your shares are secured as high-level of data privacy standards are followed.
  2. You can invest in shares anytime anywhere.
  3. Electronic settlements are faster.
  4. No risk of theft, loss, non-delivery of certificates.
  5. You can buy and sell as less as one share.
  6. In one account you can transact in shares as well as debt instruments.
  7. Physical securities incurred an extra cost of stamp duty. Demat account saves that cost.
  8. Easy to maintain and track.


The dematerialization policy has proved to be a boon for all investors. Will all these benefits and ease of transactions, investing has become easier for beginners too.