A Demat or Dematerialized Account is an electronic account that holds an investors shares & securities. Instead of taking physical possession of these, an investor can enable electronic settlements of his trades.
In this weeks help series we take you through everything you need to know about a Demat Account. The process to open one, what are the benefits and how you can transfer shares.
How Do You Open A Demat Account
To open a demat account, you could apply to bank (also known as Depository Participant or DP) of your choice via filling in the online form available on their website or visiting a branch closest to you. A representative from the bank will get in touch with you shortly after, with a requirement of the documents listed below –
- Account Holder(s) will have to fill the KYC application form at the time of Demat Account Opening.
- PAN Card copy for all the Applicant(s).
- Address proof for all the Applicant(s).
- Latest Photograph for all the Applicant(s) duly signed across to be affixed on the place provided in the account opening form.
- Cancelled cheque leaf for dividend Bank details.
- Customers could have/can open a savings/current account with the Bank.
Benefits of a Demat Account –
- Easy and convenient way to hold securities
- Immediate transfer of securities
- No stamp duty on transfer of securities
- Safer than paper-shares (earlier risks associated with physical certificates such as bad delivery, fake securities, delays, thefts etc. are mostly eliminated)
- Reduced paperwork for transfer of securities
- Reduced transaction cost
- No “odd lot” problem: even one share can be sold
- Change in address recorded with a DP gets registered with all companies in which investor holds securities eliminating the need to correspond with each of them separately
- Automatic credits into demat account for shares arising out of bonus/split, consolidation/merger, etc
- A single demat account can hold investments in both equity and debt instruments
- Traders can work from anywhere (e.g. even from home)
How To Transfer Shares From A Demat Account:
- Delivery Instruction Slip – To initiate the process of a transfer you’ll have to issue appropriate instructions to your depositary participant through a Delivery Instruction Slip (DIS). The DIS book is similar to a cheque book and it needs to be handled with the same care as a cheque book. Accordingly, you will always store the DIS book in a safe place in your custody and not hand over signed blank DIS to anybody. Similarly, securities can be transferred to your demat account by the instruction of the seller (transferor) to his DP. The seller will have to mention your demat account number in the DIS.
- Time life for transfer – Listed companies are required to transfer shares or send the objection memo within 15 days from the date of lodgment for transfer deeds, original certificates and all other required documents. Though this period is extended to two months in case of Debentures/Bonds.
- Compensation in case of delay – You are entitled to claim interest from the company in case of delay in transfer of shares beyond the 30-day period. For this, you can file for arbitration at the stock exchange where the company shares are listed.
In case you still might have any queries regarding a Demat Account, feel free to ask our experts and they’ll be more than happy to help 🙂