Write short note on procedure of opening demat account.
Answers
Step 1: To open a demat account, you have to approach a depository participant (DP), an agent of depository, and fill up an account opening form. Step 2: Along with the account opening form, you must enclose photocopies of some documents for proof of identity and proof of address.
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Answer:
Procedure to open a demat account:
To open a demat account you must approach your Depository Participant (DP). The DP could be your broker or a bank. While you will open your demat account with the DP, the actual shares will be held in custody by one of the depositories (CDSL or NSDL). These are institutions sponsored by large institutions with government participation and hence you are assured of safety and security.
The next step is to submit your KYC (Know your Client) documents. Along with filling the Account Opening form and filling all the details, you will also be required to submit copies of your passport sized photographs and your PAN card. Additional, you need to furnish one proof of identity and one proof of your current residential address. The KYC form has the DP-Investor agreement, which lays out the rules and regulations and your rights and obligations. Do read the fine print in detail.
At the third stage, most DPs will insist on an in-person-verification (IVP). Either you can personally visit the centre or the representative will visit your place. Some brokers permit IVP over the web cam, although most brokers still insist on IVP.
The last step is the allocation of the Beneficiary ID (demat account number) once all the documents are in place and verified. The DP id and the Beneficiary id combined becomes your unique DP code for all future transactions, IPO applications etc. Demat account can only hold shares in custody and you still need a trading account with a broker to buy and sell shares.
A few basic things to take care of here! All documents should be self-attested and originals produced on request. Proof of identity and address provided should exactly match with the details provided in the account opening form.
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