How to Choose the Best Demat Account?
If you are only looking for the best Demat Account in India, then we would urge you to modify your search and start looking for the best Demat Account for YOU. Every investor is unique and has specific trading and investment requirements. And, the Demat Account must be able to cater to your specific needs. In this article, we will offer some tips to help you choose the best Demat Account in India for your specific needs.
In India, as mandated by SEBI, a Demat Account is mandatory for buying and selling shares. Also, Demat accounts can be opened with a Depository via a Depository Participant (DP). There are two Depositories in India – the National Securities Depository Limited or NSDL and the Central Depository Services (India) Limited or CDSL. Each of these depositories has multiple DPs that offer Demat Accounts to investors.
So, how do you choose the best Demat Account in India for you? Here are some tips:
Is the account opening process simple?
SEBI has provided the outline of the process that a DP needs to follow to open a Demat Account. However, there are many ways in which the DP can make the process simpler, easier, and quicker. Does the DP offer an e-KYC process? Also, after e-KYC, do you have to visit the branch for physical verification, or has the DP incorporated a video-call verification process? While these might seem like one-time processes, they can highlight the customer-centricity of the DP.
SEBI has also mandated all DPs to offer a Basic Services Demat Account (BSDA) that offers basic services to investors at lower costs.
Are the Demat Account charges competitive?
There are various charges associated with a Demat account like account opening charges, annual maintenance charges, debit charges, custodian fees, other transaction charges, off-market transfer charges, pledge-related charges, etc. Before opening an account, ensure that you compare the charges levied by different DPs. These charges can eat away into the profits that you intend to make by trading shares. Hence, look for a cost-effective Demat Account.
Is there a seamless interface between the Demat, Trading, and Banking accounts?
When you trade in the market, money needs to move between your bank account and your broker’s account. Also, shares need to move between your Demat account and your broker’s clearing account. All this needs to happen once a trade is completed on the online trading platform. If there is a delay, then you could be levied a penalty. Therefore, it is important to assess if the Demat Account can seamlessly interface with the trading and banking accounts.
If you are planning to trade multiple times every day, then it might be prudent to open a Demat account with a stockbroker who is also a DP. This way, your Demat and Trading accounts will be synced, and you will only need to sync up your banking account.
Some essential aspects to look out for:
Barring the three points mentioned above, here are some additional aspects that you must look out for before signing the dotted line:
- Does the DP execute transactions quickly and in an error-free manner?
- What do the existing clients of the DP have to say about the quality of services rendered?
- Does the DP have any pending complaints with the regulators that have been escalated for a long time?
- Is the DP a financially strong company?
- Does the DP provide a mobile app to allow you to log in and check your holdings at any time?
These tips can help you find the best Demat Account in India that is suited to your needs.
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You can open a Demat account with your stockbroker if he is a DP with the NSDL or CDSL. However, it is not necessary to open one with the broker. If you do not intend to trade a lot, then you can open a Demat account with any other DP that offers the best services. However, if you intend to trade in high volumes and/or very frequently, then opening a Demat account with the stockbroker can be a good idea.
Here are the steps that you need to follow to open a Demat account online:
- Choose the DP with whom you want to open a Demat account
- Visit the website of the DP and initiate the Demat Account opening process
- You will have to fill the account opening form and KYC form
- Attach copies of your PAN card, Proof of Identity document, Proof of Address document, Proof of Bank Account document, and Proof of Income document.
- Receive the DP ID and Demat Account Number from the DP once the account is opened.