What is a DMAT Account and Why do you Need it?

DMAT account is important for trading financial securities online. Find out how to open DMAT account and why you need it.

Created On: Jun 30, 2021 19:09 IST
Modified On: Jun 30, 2021 23:12 IST
DMAT Account - Meaning and Functions
DMAT Account - Meaning and Functions

Just like a Bank account where individuals can save money for investment, in the financial market, there is a DMAT account, that helps in trading of shares in the stock market.

In this article, you will find out more about the DMAT account, its functions, and the process to open it. Read on to know complete details about the DMAT account:-

What is a DMAT Account?

DMAT account is essential requirement for investing in equity shares in the stock market. The DMAT account keeps track of the shares and securities in dematerialised or you can say, in electronic format. Earlier the shares were traded in the physical form and for the same share certificates were issued.

However, in the contemporary times, shares are being traded in the electronic form through a DMAT Account number.

Here is the list of financial instruments that you can trade through a DMAT account:-

  1. Equity shares,
  2. Exchange Traded Funds (ETFs),
  3. Mutual Funds (MFs),
  4. Bonds, and
  5. Government Securities.

As a investor, it is advisable to invest the money in several types of instruments in order to minimise the risk of dependency on one tool of investment. A DMAT account allows an investor to keepo zero balance in the account if they wish to curtail the investment.

Facilities offered by Demat Account

Here is the list of operations that one can carry out through the DMAT Account:-

Trading of shares - A DMAT account is used to transfer share buy and sell shares in the stock market at the trading platform.  

Loan facility - Investors can access loan facility through the DMAT account. An investor can pledge the securities held in the DMAT account as a collateral to avail loan from various banks.

Dematerialization & rematerialization - Getting the physical certificates of the shares converted into electronic format is one important facility that investors can access through the DMAT account. In fact, investors can also get the electronic securities converted back to the physical form as per their requirements. Seek help from the broker through which you are seeking DMAT account facility.

Multiple access platforms - A DMAT account holder can access his/her account through multiple platforms to trade shares. An investor can trade, track, and access DMAT account using computer, smartphone, or any other electronic device.

How to open DMAT Account?

Here are some pre-requisities that an individual are advised to follow in order to open a DMAT account:-

Documents Required

Here is a list of mandatory documents required at the time of opening a DMAT account:-

Proof of Income (Either of the below mentioned)

  • A photocopy of the Income Tax Return (ITR) Acknowledgement slip
  • Certificate of Net Worth or photocopy of the annual statement of accounts authenticated by a Chartered Accountant.
  • Salary Slip of the current month or Form 16.
  • A statement of Demat Account holdings with an eligible Depository Participant.
  • Latest statement of bank account containing the income history of last 6 months.
  • Any documents that prove ownership of assets through self-declaration.
  • Proof of Identity

PAN card having a valid photograph.

Identity Proof - Aadhaar card / Voter ID card / driving license/ Passport.

Proof of Address (Either of These)

  • Passport/Voters Identity Card/Ration Card/Registered Lease or Sale Agreement of Residence/Driving License/Flat Maintenance bill/Insurance Copy.
  • Utility bills like landline telephone bill, electricity/gas bill which is not more than 3 months old.
  • Bank Passbook which is not more than 3 months old.
  • Address proof given in the name of the spouse

Process to Open DMAT Account

To pen a DMAT Account, please follow the steps mentioned as under:

Step 1- Choose a Depository Participant (DP) to open a DMAT Account.

Step 2 - Fill an account opening form and attach a passport-sized photograph and photocopies of the documents mentioned above

Step 3- Carry the original documents to the DP to open a DMAT account.

Step 4 - An In-person verification will be done by the DP. Get the KYC done and pay an annual maintenance fee for DMAT account.

*Disclaimer - The information provided above is only for information purposes to spread financial knowledge and enhance literacy among our readers. It shouldn’t be taken as financial advice by anyone.

Also Read

What are Mutual funds and how to Invest in them?
What is Stock Market and How to Invest in it?




 

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