Kochi-based Solvin Tom, a 29-year old quality analyst
working for Wave Online Infoway Pvt. Ltd, has two demat accounts from different
banks. “I opened the first one in 2012 which I use for trading. This year, I
opened another one as it was offered for free,” said Tom. He usually trades
with the account that he opened first.
“There has been an increase in the number of demat accounts
due to the euphoria of a new government, macroeconomic indicators and markets
touching 30,000,” said Srikanth Meenakshi, co-founder and chief operations
officer, FundsIndia.com.
A demat account is required to hold shares in an electronic
format and is similar to a bank account. It can also be used to hold financial
instruments such as mutual funds, bonds, exchange-traded funds and
non-convertible debentures. There are various channels to open a demat account and each comes with costs attached.
Some offer a trading account with the demat account while others ask to open a
separate trading account at a cost. However, one does not need to have multiple
demat accounts. If you also have been offered a “free” demat account, here’s
what you should know.
Opening an account
If you plan to invest in stocks directly, you need to open a
demat account to hold shares in dematerialized form. To open the account, you
need to approach a depository participant (DP). The two biggest depositories in
India, National Securities Depository Ltd (NSDL) and Central Depository
Services Ltd (CDSL), have authorized several DPs to open demat accounts.
According to NSDL website, it has 12.7 million investor accounts.
DPs can either be banks, stock brokers, discounted brokers
or online investment platforms. To open a demat account through any of these channels, you will
have to fill an account opening form and a client relationship form. You will
have to paste a photograph on the form and sign across it. You may be asked to
fill a nomination form. This is optional and is applicable only for individual
accounts. For know-your-customer requirements, you will have to provide an
identity proof which can be your Permanent Account Number (PAN) card, valid
passport, voter identity card, driving licence, photo debit/credit card issued
by banks, college identity card which will be valid till the applicant is a
student, identity card or document issued by a recognized body. For address
proof, you can provide voter identity card, utility bills, passport or driving
licence.
Usually a representative from a DP’s office comes to collect
documents. Once you provide the relevant documents and the filled forms, your
account gets activated. “If you have provided complete details and documents as
required by NSDL, your account will be opened within 3-7 working days. The time
taken varies across channels,” said Meenakshi.
And as mentioned earlier, you
do not need multiple accounts. “There is no need for multiple demat accounts
with different companies or banks as almost all of them will give you similar
features,” said Vishal Gulecha, head-equity products, ICICI Securities Ltd.
