What is meaning of demat account ?

Question

What is meaning of demat account ?

Answer 1

DEMAT ACCOUNT

Definition

Demat account is a safe and convenient means of holding securities just like a bank account is for funds. Today, practically 99.9% settlement (of shares) takes place on demat mode only. Thus, it is advisable to have a Beneficiary Owner (BO) account to trade at the exchanges.

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Answer 2

Demat account....................................

In India, a demat account, the abbrevation for dematerialised account, is a type of banking account which dematerializes paper-based physical stock shares. The dematerialised account is used to avoid holding physical shares: the shares are bought and sold through a stock broker.

This account is popular in India. The Securities and Exchange Board of India (SEBI) mandates a demat account for share trading above 500 shares. As of April 2006, it became mandatory that any person holding a demat account should possess a Permanent Account Number (PAN), and the deadline for submission of PAN details to the depository lapsed on January 2007.

Procedure

1.Fill demat request form (DRF) (obtained from a depository participant or DP with whom your depository account is opened).

2.Deface the share certificate(s) you want to dematerialise by writing across Surrendered for dematerialisation.

3.Submit the DRF & share certificate(s) to DP. DP would forward them to the issuer / their R&T Agent .

4.After dematerialisation, your depository account with your DP, would be credited with the dematerialised securities.

The benefits

- A safe and convenient way to hold securities;

- Immediate transfer of securities;

- No stamp duty on transfer of securities;

- Elimination of risks associated with physical certificates such as bad delivery, fake securities, delays, thefts etc.;

- Reduction in paperwork involved in transfer of securities;

- Reduction in transaction cost;

- No odd lot problem, even one share can be sold;

- Nomination facility;

- Change in address recorded with DP gets registered with all companies in which investor holds securities electronically eliminating the need to correspond with each of them separately;

- Transmission of securities is done by DP eliminating correspondence with companies;

- Automatic credit into demat account of shares, arising out of bonus/split/consolidation/merger etc.

- Holding investments in equity and debt instruments in a single account.

Required Documents

The extent of documentation required to open a demat account may vary according to your relationship with the institution. If you plan to open a demat account with a bank, a savings, current and, or other account for which the holder have been issued a check book, such holder has an edge over the non-account holder. In fact, banks usually offer additional incentives to customers who open a demat account with them. Along with the application form, your photographs (with co-applicants) and proof of identity/residence/date of birth have to be submitted. The DPs also ask for a DP-client agreement to be executed on non-judicial stamp paper. Here is a broad list:

- A canceled check, preferably MICR

- Proof of Identification

- Proof of Address

- Proof of Pan card (mandatory)

- Recent photographs, one and, or more

For proof of identification and, or address self-attested facsimile copies of PAN card, Voter’s ID, Passport, Ration card, Driver’s license, Photo credit card, Employee ID card, Bank attestation, latest IT returns and, or latest Electricity/Landline phone bill are sufficient. While they only ask for photocopies of the documents, they will need the originals for verification.