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All About Demat Account LKPSecurities
What is the procedure for opening a Demat Account? • A demat account is, in a way, like a bank account. Just as you hold your cash • balances in your bank account, you hold equity shares and other securities in your • demat account. In the past (prior to 1997) shares were held in physical form (share • certificates). Once these physical shares are dematerialized, they can be held in a • demat account. No worries about bad delivery, losing your share certificates, • signature mismatch, storing your share certificates etc. Nowadays, all share • purchases and sales are done only in the demat mode (i.e. debit or credit to your • demat account). But, first let us look at the procedure to open a demat account.
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.
Procedure to open a demat account: • 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.
Procedure to open a demat account: • 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.
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