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NSDL Demat Account Guide for Beginners

NSDL Demat Account Guide for Beginners

About NSDL

Just as a bank accepts lets depositors keep money in the form of FDs, RDs, savings accounts, or current accounts, a depository lets investors keep their securities like shares, bonds, debentures, and similar instruments in an electronic format.

NSDL, or National Securities Depository Limited, is the world's largest depository and India's oldest. It was launched in 1996. Before NSDL, investors held securities in physical or paper format. 

Apart from NSDL, there is another depository in India known as CDSL or Central Securities Depository Ltd. While functionally, both depositories provide the same services to investors, NSDL primarily operates in the National Stock Exchange, and CDSL primarily functions in the Bombay Stock Exchange

The promoters of NSDL include the Unit Trust of India (UTI), National Stock Exchange (NSE), and Industrial Development Bank of India (IDBI).

How Does NSDL Operate?

After learning about NSDL, we next move on to understanding how it works. It is compulsory for investors who want to trade or invest in stocks or equity shares to open a Demat account, and that is what makes NSDL such an important entity.  

Just like people need a bank account to make payments to others and receive payments from others, investors and traders need a Demat Account to buy or sell shares. NSDL allows the following to open a Demat Account: 

However, investors cannot directly open an NDSL Demat account. They need to approach a depository participant or a DP, a registered stock broker or agent of NSDL, to open a Demat Account. The DP plays the role of an intermediary between NSDL and the investor. Securities are held in the Demat form by the DP. 

Apart from letting investors hold their securities in the Demat form, NSDL also provides investors with some value-added services. These include SMS alerts when any transactions take place and CAS or Consolidated Account Statement providing comprehensive information about all securities held by the investor. 

What is the Process of Opening a Demat Account?

The first step to opening an NSDL Demat account online is finding a depository participant or DP which is registered with NSDL. Investors need to visit the NSDL and choose a DP from the list provided. Stockbrokers also qualify as DPs, so investors can check the NSDL website to verify if the broker is a registered participant or not. 

Once investors have verified the registration of the DP, they can proceed with the Demat account opening process. Here are the steps for opening an NDSL Demat account:

  • Know Your Customer or KYC - Investors need to provide their address and identity proof to the DP. Documents that are acceptable as both address and identity proof include Aadhar Card and Passport. 
  • Document Verification: After the documents have been verified by the DP, it takes about 2 to 3 days for the Demat account to be opened.
  • Account Details: After the account is opened, the investor will get details for the NSDL Demat account login. This will include information like DP ID, Client ID, and NSDL Demat account charges. Investors can log in to their Demat Account with the login credentials provided by NSDL. 

Benefits of NSDL

Let's find out the benefits that NSDL offers investors apart from helping them transact in securities:

  • Prevents Bad Deliveries: A bad delivery means the quality of assets received by the investor was poor or bad. During transactions in physical shares, investors could not verify the quality of the asset, and a bad delivery was possible. With NDSL Demat account, there is no risk of bad delivery.
  • Problems With Physical Certificates: Investors could face problems with physical certificates since they could get stolen, damaged, or mutilated. Getting duplicate shares was time-consuming. Shares held in electronic form through NSDL don't have such problems. 
  • Easier Registration and Transfer: Unlike physical shares, investors don't need need to get the company registrar's approval for the transfer of shares. Once they are transferred to the Demat account, the investor is the owner. 
  • Faster Liquidity: Investors can sell their holdings at any time and receive payment into their registered bank account in T+2 or two days from the date of the transaction.
  • Less Paperwork and Brokerage: Since the entire process is automated, the broker's role and fee are both reduced. Keeping records on paper is also not required since all transactions are recorded online.
  • Smooth Bonus and Rights Disbursement: Companies keep issuing bonus and rights shares from time to time. Bonus shares are issued out of the profits of the company hence you don't need to pay anything. For the rights shares, you need to pay for the shares that you are eligible for. With NDSL Demat account, non-cash corporate entitlements like bonuses and rights shares are directly credited to your account, and you don't have to worry about loss of share certificates during delivery.
  • Better Control: Since you get status reports periodically from NSDL, you can monitor the performance of your holdings. 
  • Change of Address Simplified: You don't need to inform the registrar or each individual company in your portfolio about your change of address. Just inform your DP and provide the required supporting documents. 
  • Hassle-Free Transmission: Before the Demat account, the transmission of shares to the nominee was a huge challenge. Now the nominee merely needs to open a Demat Account and all the holdings of their legal heir will be transferred in a few days. The nominee or nominees don't have to write to each individual company to complete the transmission process. 
  • Minor Holding: Where the securities are held by the natural guardian for and on behalf of a minor, sale of shares can be easily done without the approval of the court. 
  • Seamless Portfolio Management: You are provided with all information regarding all the stocks in your portfolio in a consolidated format. This makes monitoring easier and you can decide the stocks you want to keep or sell.
  • Faster Grievance Redressal: If you have any grievances against the DP, you can approach NSDL for redressal.  

Conclusion

It's easy to invest in shares with this NDSL Demat account opening guide. Investors just need to ensure that they have the required documents for identity and address proof. Happy investing!

FAQs

How Can Investors Open a Demat Account? 

Investors cannot open a Demat account directly through NSDL. They need to look for a registered DP or depository participant. The list of registered DP can be found on the NSDL website. After choosing the DP, they must fill out the KYC or Know Your Customer form. 

You need to provide some simple personal details in this form, like name, address, email, phone number, and more. Your address and ID proof, like your driving license, Aadhar card, Voter ID card, or Passport, are also required. 

Along with address and identity proof, you must share a cancelled cheque for bank account proof, your PAN card, and 3 passport-size photographs.

After your documents are verified, your NSDL Demat Account will be opened in 2 to 3 days. The welcome kit includes your Client ID, Demat ID, and NSDL Demat Account charges. You can start trading with your login ID and password. 

All your details are recorded in the Client Master Report after your Demat account is opened. Check your details and make any corrections required before you start trading. 

Can Investors Open Multiple Demat Accounts?

Yes, investors can open more than one Demat account. The only condition is that multiple Demat accounts cannot be operated under one DP. So multiple Demat accounts can be opened with multiple DPs. However, remember that you must also pay the Demat account charges for all accounts. If you feel you have too many Demat accounts, you can always close as many as you want when required.

Does a Demat Account Have the Option of Either or Survivor Holding?

No, investors cannot operate a Demat Account on an either-or survivor basis. They can opt for a joint holding where all instructions need the signatures of the joint holders. 

Is In-Person Verification Required When Opening a Demat Account?

Yes, SEBI guidelines make it compulsory for an in-person verification when opening a Demat Account. You must be present when opening the account since your identity must be verified. The DP representative will ensure that the passport-size photo provided by you matches your PAN card. If there are multiple applicants, all joint holders must be present for the in-person verification process. 

Do Demat Accounts Need a Minimum Balance? 

No, there is no need to maintain a minimum balance in the Demat account since the DP does not prescribe this. Investors can have a zero-balance account. 

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