According to the National Securities Depository Ltd., “dematerialization is the process through which physical certificates of securities are turned into electronic balances”.
In other words, dematerialization is the process of converting physical shares and securities to digital form to facilitate the purchasing, holding, and selling of shares.
Depository participant accounts are required before an investor may trade in dematerialized securities (DP). There are two parts to a Demat account. One can either submit a drf to dematerialize the physical shares or use your Demat and trading account to purchase and sell shares in Dematerialized form.
All securities purchases are credited to the Demat account, while all securities sales are deducted from the Demat account. Bonuses and split shares are immediately deposited to the Demat account.
A Demat account is a digital platform that allows you to manage your securities.
When you purchase shares in your trading account, your Demat account is credited on T+2 days (2 business days following the transaction date). When you sell equities, the T+1 day debits your Demat account. You might think of a Demat account as a bank account for your investments.
How to open demat account?
Step 1: The first step on how to open demat account is to pick a Depository Participant (DP). To create a Demat account, you must first choose a deposit partner. You may choose the top depository services in India from banks, stockbrokers, and online investment platforms. When choosing a DP, seek one whose products and characteristics match your requirements and criteria.
Step 2: Fill up and submit the Demat Account Opening Form-
To open a Demat account, visit your DP’s website and complete the online Demat account opening form. Numerous depository participants provide you to open both trading and depository accounts concurrently.
Step 3: Adhere to KYC (Know Your Customer) standards-
After you’ve submitted your application for a Demat account, you’ll need to comply with the Know Your Customer (KYC) criteria. It needs scanned copies of KYC papers such as identification, proof of residence, bank account statements, and proof of income. It is preferable to have all of the relevant documentation on hand before applying since this will expedite the procedure.
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Step 4: Complete the Verification Procedure-
After giving your KYC information, you must complete an ‘In-Person Verification’ procedure (IPV). This is a critical activity to do to verify the accuracy of your data. Depending on your DP, you may be required to attend in person at either of your service provider’s offices.
Step 5: Acknowledge and Sign Copies of the Agreement-
You will be required to execute a contract with your Depository Participant upon verification. This agreement details the obligations and rights of the depository participant and investor.
After the preceding stages are completed, get your BO ID number.
After you sign the agreement, your DP will begin processing your application for a Demat account. Once your application is accepted, you will be assigned a unique Beneficial Owner Identification Number (BO ID). You may use this BO ID to access your Demat account. After one opens their demat account they can easily invest in the commodity market too.
Once you have Demat account open, now you can trade in shares and commodities. If you are wondering what is commodity market, then you should know that commodity markets are used to purchase, sell, or trade raw materials such as oil, gold, or coffee. There are two types of commodities: hard commodities, which are mostly natural resources, and softer commodities, which are often livestock or agricultural products. You can join some course or seek expert’s guidance for more knowledge.