Things to know before opening Demat account

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If someone is interested in trading in equities, they first need to open Demat account. The Demat account is equivalent to the bank account. For example, our bank account holds our money. Similarly, the Demat account grasps our shares in custody.

What criteria should you examine before creating a Demat account?

Is it necessary to ask any questions before creating a Demat account? What do you have to bear in mind when creating a Demat account? Let us take a look at some important things regarding a Demat account.

  • Check that your Demat and trading accounts are with the same broker.

Generally, the brokers help you by opening a trading-cum-Demat account in one go, but what if your broker does not own a DP license? Then, once you sell shares with your broker, you must ensure that you send the debit instruction slip (DIS) to your broker on time. If you do not submit the DIS on time, it may result in late delivery and loss. When your broker and DP are the same people, the entire procedure becomes simple and more fluid. In reality, you can choose online Demat and trading and grant your broker a power of attorney to debit the Demat account on sale and credit the Demat account on buy. You save a lot of time and effort by having your trading and Demat accounts in the same place.

  • How dependable is the Demat technology platform?

Most brokers now allow you to access your trading and Demat accounts through a single portal. Your bank account funding, credit to Demat accounts, debits to Demat accounts, and credits to your bank account occur effortlessly. Check that the DP has a solid technical base in place to guarantee that your entire Demat process runs well. When you sell shares, your Demat account gets debited the next day, and when you acquire shares, your Demat account gets credited on T+2 day.

  • Determine the Demat charges involved

You’ve probably seen DPs advertise free account opening regularly. Remember, this is simply one of the expenses associated with managing your DP account. Then there’s the annual maintenance fee (AMC), which you’ll have to pay each year. Usually, this depends on the value of the shares in custody. Moreover, the proceeds from the sale of the securities flow into your Demat account. Finally, the DP must pay a fee to the NSDL or CDSL, which will also get deducted from your account.

Aside from that, DPs will charge you if you request a physical statement, duplicate statement, or statement of holdings/transactions for evidence. If your DIS fails to owe to technical issues, the DP will charge you a penalty fee again. When calculating the entire cost of your Demat account, you must consider the sum of all these charges to get a complete picture.

  • Streamlined banking, brokerage, and custody

Banking, broking, and custody are only possible if your broker is also a bank. But it isn’t the most salient consideration. If your brokerage and custody are seamless, and you load money through NEFT, RTGS, UPI, or an uncertified payment channel, you’re good to go. Remember that many brokers charge a fee to utilize the payment portal. Therefore it’s best to use the NEFT / RTGS / UPI method for transferring cash because it’s usually free. The less you have to worry about administrative concerns, the more seamless these three actions are.

  • High-quality customer service

Routine transactions are ineffective for evaluating a DP. In addition, we need to think about how ancillary services are delivered. For example, how long does it take to dematerialize your physical shares? Do corporate acts immediately credit your Demat account? To what extent does the SP address consumer engagements, privileges, complaints, etc.? All of this adds up to a positive service experience.

  • Pending complaints against the DP

It is more of a hygiene problem, and it will reveal how committed the DP is to its service standards. Be mindful of opening a Demat account with a DP with lots of service quality complaints with SEBI. That is not a promising indication. Also, check that no regulatory investigations are ongoing against the DP, as we have seen in the past with DPs like Karvy and Indiabulls. Finally, examine social media and discussion boards for poor criticism regarding their DP services. While you are not required to accept all unfavorable comments at face value, bear in mind that there is no smoke without fire.

 Conclusion

Some of these basic checks and balances will surely make sure you don’t end up with the wrong Demat account in the wrong place! Besides this, countless stock market courses can help you with brief details about the stock market and demat accounts.