Every individual who wishes to invest or start investing in the stock market, needs to have a demat account. The old days of brokers purchasing physical share certificates for us are well behind us. Ever since the electronic mode of stock trading has come to be, all trades take place through the internet and an electronic trading portal.
Now that trading has become a completely online process, it is mandatory to have a demat account in order to trade and invest. There are two types of demat account options available to investors; an NSDL demat account and a CDSL demat account. NSDL and CDSL are both depositories in India.
In the past, one would purchase or sell physical share certificates from their broker, but as technology grew, a new method of buying or selling shares came along. The demat account. A demat account or a dematerialized account is an account where all your investments and securities are stored in an electronic form. It’s sort of like a bank, but instead of cash, shares and securities are stored. A demat account offers a wide variety of benefits, like increased safety and security, quick and easy transfer of shares are a few of them.
Just as you would open a savings account with a bank, a demat account has to be opened with a depository with the help of a depository participant. In India there are two depositories; National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL). NSDL is the oldest and most renowned provider of demat account services. It also provides a wide variety of shares related services to its customers.
Just like how its mentioned above, the NSDL allows traders and investors to open demat accounts to hold securities and other financial instruments. And just like banks accept cash deposits from their customers, the NSDL accepts securities deposits from its customers. But to open an account with the NSDL, you cannot approach them directly but instead, have to go through a depository participant (DP) which can be any bank in the country. The NSDL also sends constant updates to its customers and provides consolidated account statements (CAS) that give all information about securities in one place.
A demat account opened with NSDL is called an NSDL demat account. It can only be opened through a Depository Participant (DP) who is registered with NSDL. Most stock broking houses are depository participants as well. Once you have gone through the entire list of depository participants registered with NSDL, you can register yourself with your most preferred choice. This can be based on their reputation in the market or just your personal preference.
NSDL demat accounts are fairly easy to open. These are the steps:
Now that we have understood what an NSDL demat account is, let us learn some of its benefits.
While there are several advantages associated with opening an NSDL demat account, there are a few disadvantages as well. They are:
Once you’ve opened an NSDL demat account you can start buying and selling shares electronically. Incase you have physical shares with you, you can always place a request to dematerialize those shares with your DP. Also, with an NSDL demat account, you can also get access to several other features like NSDL mobile application, e-voting facility and electronic Delivery Instruction Slip (DIS) facility to name a few.
Just keep in mind that DO NOT share your NSDL credentials with anyone else as any unauthorized access can lead to trades happening under your name without your knowledge which could be disastrous and the possibility of losing all your portfolio.
NSDL offers several facilities like dematerialization of shares, facilitating redemption or repurchase of mutual funds, electronic settlement of trades, effecting the transmission of shares, freezing of demat accounts to prevent amount transfer to name a few.
The NSDL has certain eligibility requirements for becoming a DP as per the SEBI regulations. All DPs are the same in the sense that they are only appointed after they receive a certificate of registration by SEBI. The only differentiating factor among DPs is the kind of services and offers they provide to customers.
There are several things you can do with your NSDL demat account
Yes. In order to do so, you first need to open a new demat account with your preferred DP where you want to transfer the securities. Once done, you need to fill out an “Account closure form” with your existing DP. In the form, you need to mention the details of your new demat account and when approved, the funds will get transferred and the source demat account will get closed.
The NSDL charges the DPs and not the investors. The charges are fixed and based on the usage of the NSDL system. The details of the charge can be found here. The DP in turn charges the client for its services. Those charges vary from the services offered by the DPs.
Please note that by submitting the above mentioned details, you are authorizing TradeSmart to call and email you and also to send promotional communication even though the contact number may be registered under DND.
Please note that by submitting the above mentioned details, you are authorizing TradeSmart to call and email you and also to send promotional communication even though the contact number may be registered under DND.
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Please note that by submitting the above mentioned details, you are authorizing TradeSmart to call and email you and also to send promotional communication even though the contact number may be registered under DND.