How to Operate Demat Account?

The term ‘demat’ might be all too familiar if you are an investor. Short for a dematerialized
account, these digitized units hold your financial securities.

However, the most prominent use of a demat account is to trade shares in the Indian stock
market. With a 35% rise in these accounts, it is no wonder that people want to make the
most of the share market opportunities.

If you want to know how to use a demat account, it is crucial to understand certain
fundamentals. This article aims to simplify all the technicalities and guide you to operate a
dematerialized account fluently.

What is Demat Account: A Quick Look at the ABCs

Today, all share transactions and dealings happen digitally. The online infrastructure allows
hassle-free operations, convenient record storage, and ease of tracking financial details.

So, a demat account serves as an individual repository for investors. Simply put, you can
store and manage digital copies of your stocks in an electronic format.

A dematerialized account is like a bank account. The difference?

Your bank holds money while demat holds financial securities like equity, stocks, debts, etc.
Opening this account is mandatory if you want to delve into online stock trading.

Types of Demat Accounts

There are three categories of demat accounts:

● Regular: For Indian citizens who live in the country

● Repatriable: For non-resident Indians to transfer money abroad (requires a non-
resident external bank account)

● Non-repatriable: For non-resident Indians without abroad fund transfers (requires a
non-resident ordinary bank account) 

So, you can choose any of these types depending on your residential status and requirement
for fund transfers.

Operating a Demat Account: The Stepwise Process

Follow these steps to simplify dematerialized account operation and initiate your trading

Choose a Depository Participant (DP)

You cannot trade directly with the stock exchange. For this purpose, you need a legalized

A depository participant (DP) is a firm or enterprise that holds securities. You can call them
registered stockbrokers for better understanding.

There are three mediums to avail of DP services in India:
● Stockbrokers
● Online platforms
● Banks

So, to begin operating a demat account, you need to select a suitable DP. Explore the features, experience, knowledge, and reliability of various depository participants before finalization.

Keep Important Documents Ready

Here is the vital evidence that you need to access and provide for opening a demat account:
● PAN card
● Aadhaar card
● Driving license
● Bank passbook
● Form 16
Depending on your requirements, your DP will ask for all or most of these documents.
Sometimes, you can also provide a canceled cheque or passport for verification.
So, ensure you have all the original, xerox copies and scanned files of these documents.

Open Your Demat Account

In this step, you should get in touch with your depository participant. The process can
become more convenient if you opt for a reliable online broker.

Fill out the account opening form on the website of your DP. After filling in the details, the
depository participant will initiate the verification process.

After verifying, the DP will offer the following information:
● DP ID number
● Client identification
● Client report (master)
● Tariff sheet
● Rights and obligations of the owner

In this stage, KYC verification is of utmost significance. You need to undergo an ‘in-person
verification’ process. These days, you can carry this procedure online through a webcam,
depending on your DP.

Complete the Main Formalities

The last stage includes signing a contract with your depository participant. Read all the
rights and responsibilities thoroughly.

Next, acquire your Beneficial Owner Identification Number (BO ID). This number is crucial to
access and operate your demat account.

The Initialization of Trading Activities

The four-step process completes the successful opening of your individual dematerialized
account. Still, you should know how to use a demat account after completing the initial

Here are some vital pointers that you should pay close attention to for operating your

● You can allocate shares and link the demat to a trading account
● It is possible to view all the demat holdings online
● You can transfer shares using depository instruction slips
● The account stores all the records of financial purchases or sales
● Conduct occasional transactions to keep the demat account active 

To start stock trading, you need to follow the share market news and happenings. Build a
diverse portfolio and trade across various sectors.

Keeping Your Demat Account Safe During Active Operations

Opening and operating your dematerialized account is simple. However, keeping it safe
from cyber-attacks or spying is challenging. Thankfully, some tips and suggestions prove
handy in staying away from potential fraud.

Stay Vigilant and Keep Constant Track

The simplest tip to safeguard your dematerialized account is to not forget about having one!

Some people relocate abroad or lose interest in online trading after some time. Despite
these reasons, phishing attacks can be a threat to any demat account holder. 

So, keep track of all the transactions and records on your account. Log in periodically and
freeze your account if you do not want to use it for an extended duration.

Keep Your Log-in Details Safe

Like most online accounts, your ID and password are key pieces of information. So, follow
these suggestions to keep such sensitive details safe:

● Do not store your log-in information in an easily accessible source
● Keep changing the demat password regularly
● Refrain from using common words or related objects as your password
● Do not share these details with anyone

In addition, you should avoid using public Wi-Fi and rely on your home network to operate
the demat account.

Track Your Account Statements

First, keeping your email address and phone number constant is vital. This way, you prevent
the issue of missed or lack of communication on your online trading.

Next, compare the details of your demat and trading accounts. These transactions should
match. In case of any anomaly, contact your depository participant without any delay.

Keep the Debit Instruction Slip Booklet Safe

The debit instruction slip booklet (DIS) is essential for transferring securities. You need to
detach the slip, sign it, and submit it to the broker to transfer assets.

Consider the DIS booklet similar to your bank’s checkbook. So, keep it in a safe place
without easy access to an outsider.

Closing the Demat Account

Operating your account consists of three main facets:

● Opening
● Executing
● Closing

If you decide to freeze or close your demat account, the process is straightforward. Fill out a
request form and sign in all the necessary fields.

Close all the dematerialization requests and submit the closure application to your
depository participant. This way, opting out of online trading to take a break or open a new
account is easy.

Wrapping Up

To operate your demat account, it is crucial to complete all the opening formalities. Choose
a reliable DP, submit the required documents, and acquire your BO ID.

Next, executing trading and security dealings is quite straightforward. Keep track of all the
transactions on your demat and trading account regularly. If you notice any discrepancy,
ensure that you contact the DP without delay.

It is also crucial to pay the annual maintenance fees as per government laws. So, keep track
of the opening, transactional, safety, and closure details to operate your dematerialized
account fluently.

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