If you are new to stock trading then the first thing you should do is to open a demat. Stock trading was once done in an open outcry system. Almost all stock trades are now done electronically, ever since the introduction to electronic stock trading.
Trading is now entirely electronic, so a demat account is a requirement. There are two types of demat accounts available in India: a NSDL and a CDSL. NSDL as well as CDSL can be used to deposit funds in India.
Here's all you need to know about NSDL's demat account. Let's start by explaining what a demat is and what NSDL stands to.
An demat account can be used to store securities, such as bonds and equity shares in electronic format. The demat account can be thought of as a bank account that holds shares and other securities.
All equity shares in a company should be stored electronically since physical certificates of share are no longer valid. A demat account is needed for this purpose. This account has many benefits, including increased security and speedy transfer of shares. It also allows for direct credit for corporate actions, such as dividends or bonus issues of shares.
A depository participant (DP) is required to open a demat account. This is similar to opening a savings account at a bank or financial institution. India has only two depositories. One of them is the NSDL. NSDL is National Securities Depository Limited, and it is the first and most prominent institution in India that offers depository and demat accounts services. NSDL offers demat accounts and many other services related to shares for customers.
A demat account opened with the National Securities Depository Limited is often referred to as an NSDL-demat account. To open a NSDL demat account you must approach a participant (DP) registered with NSDL.
To view the complete list of depository participants registered with NSDL, all you need to do is to visit the depository’s website. Most stock brokers double up as depository participants. To find out if they are registered with NSDL, you can contact your preferred stock broker.
It is very easy to open an NSDL Demat account. Here is a quick overview.
1. First, contact a registered participant in NSDL's depository program.
2. The Know Your Customer (KYC), requirements will then be completed. You will need to submit the required application form, duly completed, along with a copy your PAN card, proof of address, and details about your bank account details, to the DP.
3. After all relevant documents have been received by the DP they will be subjected to verification.
4. After successful verification, the DP will open a demat account at NSDL for you.
5. The DP will provide you with the details of your account after opening it. This includes your DP ID and Client ID. A copy of your Client Master report, tariff sheet and a copy the Rights & Obligations for Beneficial Owners and Depository Participants.
6. In addition to this, your DP would also provide you with the NSDL demat account logincredentials, which you can then use to log into your NSDL demat account.
After you have opened an NSDL Demat account with your DP, it is possible to trade securities electronically through your trading platform. You can request dematerialization of shares certificates that you already have if you are in possession of them. The DP will then convert the shares into electronic form and credit them to your demat account.
You also get access to a dedicated NSDL Mobile Application and an electronic Delivery Instruction Slip(DIS) facility.
Let's not forget one thing. Your login credentials to your NSDL Demat account are extremely confidential and should always be kept private. Keep your password and user ID safe. You can secure your NSDL Demat account from unauthorized access by doing this.