Dematerialization
Bombay stock exchange was founded in the 1875, during that time traders’ stands on floor and cry prices of stocks for buying and selling. Once traders pay share prices they receive physical copy of shares called certificate but final settlement takes very long time because of delivery of physical copy. This was very tedious task to keep physical copy safely for long time also it took lots of paper work.
In 1996, dematerialization was come into the picture. Dematerialization is a process by which physical share certificates held by investors converted into equivalent number of electronic security form and credited into investor’s demat account.
BENEFITS of Dematerialization:
Common Bank : Now you can hold your shares, bonds, Mutual Funds, etc in a common account.
Automatic Update: Because this is a common account so you don’t need to provide your updated address whenever you transact rather you just need to update your new address in common account and that new address will automatically updated for future transaction.
No Odd-lot Problem: Previously a single or odd number of securities could not be transacted but now this problem eliminated.
Low Risk of Delivery: Once your trade has been approved, the securities automatically credited to your account along with stock split, or bonus shares. This also eliminates risk of fake shares, thefts, and deliveries go wrong.
Reduce Cost: Previously transferring the securities incurred extra cost due to stamp duty but in demat this cost has been removed.
Easy To Hold: You can lost paper securities and very tough to keep it safe for long time but in demat you can hold securities safely for longer time without any risk.
Share Market AND DEMAT
Share market is the market where you can buy or sell shares. Like bank account where you can keep you money safely in demat you can keep your shares, bonds, mutual funds, government securities, and ETFs safely for longer time in a dematerialization form. Now without demat account you cannot trade in share market. Once your demat account opened you can buy shares online.
How To Open Demat Account:
1. Select registered repository participant (DP). It is just like a bank or broker. You can find registered DPs from NSDL or CDSL websites.
2. Once you select a DP you can collect account opening form either from DP’s office or you can download form online.
3. After Filling up form submit all required documents. Documents are one passport size photograph, address proof, PAN card along with original copy for verification.
4. Once you submitted the application form one of the executive of DPs will visit at your address provided in the account opening form for verification.
5. Account opening may take 1 or two weeks time, it is also important to add nominee while applying for demat account.
6. Once your application processed DP will provide you an account number or Client ID along with password. Now you can access your demat account online to buy or sell shares.
7. As a demat account holder, you would need to pay some fees like the annual maintenance fee levied for maintenance of account and the transaction fee -- levied for debiting securities to and from the account on a monthly basis.
8. Minimum shares: A demat account can be opened with no balance of shares. It also does not require that a minimum balance be maintained.
Select DP ==> Fill A/C Opening Form ==>Submit Documents ==> In Person Verification ==>A/C Number or Client Id provided