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Importance of a Depository Participant for a Demat Account

by Sonal Shukla

A Demat account is a critical tool for maximising and securing financial securities in a digital form. It helps eliminate risks associated with the physical share of official certificates and documents. It also eliminates the cumbersome process of share trading. In India, if one wishes to invest in the stock market, it is mandatory to open a Demat account.

What is a Demat Account?

A Demat account holds all the securities you purchase from the stock market. Suppose, today you bought 500 shares of ABC company. So, these 500 shares will get credited to your free Demat account upon successful payment and completion of the transaction.

Demat account is quite similar to the bank account where the money you receive gets credited. A Demat account stores your in electronic format.

There is no worry of misplacing the physical certificates of shares anymore, nor do you need to spend a lot of time and money going to the exchange and availing of the physical share certificates.

When shares or other assets are purchased, the units of the purchased asset get credited to the Demat account. When there is a sale of an asset, the number of units sold gets debited from the Demat account.

Benefits of a Demat Account

With the help of a Demat account, one can hold various investments, equity shares, mutual funds, and many more. A Demat account is very similar to a bank account; each time someone sells or buys shares, the account is either debited or credited.

It eliminates the hectic process of paperwork and also streamlines and makes the process of trading a lot simpler.

Who is a Depository Participant?

A depository participant is a mediator between CSDL(Central Securities Depository Limited) and NSDL (National Security Depository Limited), as well as between traders and investors. A depository participant essentially resembles a bank that stores money and conducts transactions.

With the help of a depository participant, an individual can open a Demat account and trade through them, including storing securities with them.

Importance of a depository participant

Initially, trading produced massive paperwork, and investors had a hard time keeping up with all the paperwork. Through a depository participant, all this is managed efficiently digitally.
The processes of a depository participant are managed digitally, removing the chances of physical theft and fraud.
Managing bulk matters relating to investment becomes much more efficient and easier.
Depository participants work with their customers in a much more transparent and efficient manner. The process of buying and selling assets has been streamlined and rapid.

When it comes to a Demat account, some provisions allow joint holders- that is, there can be more than one account holder.

How to Open a Joint Demat Account?

There are some must-follow steps if one is wondering how to open a joint Demat account. Let’s deep dive into the steps.

Step 1: The first step is to approach a depository participant, who acts as a depository between the investors and the depository.
Step 2: The KYC details will be required for each account holder, as well as the identity proof, address proof, PAN card details, and Aadhar card details.
Step 3: The individual will need to verify some documents; the requirements vary according to different brokers.
Step 4: Once all steps have been correctly followed, the stockbroker or bank will approve your Demat account opening after going through some company checks.  

Now that we know how to open a joint Demat account let us look at online Demat accounts.

An online Demat account can be opened by someone over 18. An online Demat account does not require the individual to submit the documents in any sort of physical manner. Anyone over 18 can open an online Demat account, which can be used to trade digitally. Mandatory documents include a PAN card, bank account details, ID, and address proof.

Therefore, a Demat account helps streamline the entire process of trading, buying, and selling assets. A depository participant helps make the entire process even more efficient and smoother for customers.

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