In recent times, there has been a lot of increase in the popularity of investing and trading in the share market. But to be able to do it efficiently and earn profits, it is necessary to do it via proper means. One such basic requirement while trading in the share market is having an active Demat account in your name. Having a Demat account is mandatory if you want to buy or sell shares in the market. In India, there are two depositories who provide the service of Demat account: National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL). You can open an account by availing the services provided by them through various intermediaries or depository participants or stockbrokers.
A Demat account or dematerialized account is an account that holds your shares and securities in an electronic format. A Demat account helps you in purchasing and selling shares online. You can hold your shares, mutual funds, government securities, bonds, and exchange-traded funds all in one place. Dematerialisation is the process of convert physical securities in an electronic format. With the help of the internet, you can access your Demat account at any given time and by dematerializing your shares and securities, you can keep an eye on your investments anytime and anywhere.
The process to open Demat account is also very simple. You just need o to follow a few easy steps.
- Contact a Depository Partner (DP) that is registered with the SEBI.
- You will have to fill an account opening form.
- Submit your KYC documents for verification along with the filled application form.
- Sign an agreement with all the terms and conditions for opening a new account.
- Once the verification is complete and the application is processed, you will be provided with a Demat account number and you can then start trading in the share market using your newly opened Demat account.
People at times get confused between a Demat account number and a DP ID. Let us make one thing clear right in the beginning, although inter-connected, these two are different ids and are not similar. A Demat account number, also at times known as the Beneficiary ID is a unique 16 digit account number assigned by the Depository Participant to the account holder in order to allow the holder to carry out online trades via the account through electronic mode. This number is provided at the time of the account opening. The Demat account number is essential while trading. The format of the number differs depending on the depository in context. Nevertheless it always sixteen characters long. For example, in the case of CDSL, all 16 characters are numeric and in the case of NSDL, the first two characters are alphabetic while the rest 14 are all numeric.
A Depository Participant or a DP is an intermediary. There are two categories when it comes to investing, there are the people who invest and then there are the depositories. The job of the depositories in to act as an intermediate during the trading of the shares. Getting your Demat account verified would be next to impossible without the Depository Participant’s approval. Any brokerage firm can act as a Depository Participant and every Depository Participant has its unique DP ID. A DP ID is a number allocated to the Depository Participant by the concerned Depository – CDSL (Central Depository Service Limited) or NSDL (National Securities Depository Limited).
As far as the DP ID is concerned, it has nothing to do with the Demat account holder. The first 8 digits in your 16 digits demat account number is the DP ID. And the last 8 digits are what make up your client id. In simpler words, Demat Account Number= DP ID+ Client ID.
Now that you know it all, contact a DP, open your own account and start trading in the share market today.