How to Choose the Best Demat Account?

The Indian stock market has entirely moved from a physical share trading system to a virtual one. Now, holding shares in an electronic format requires a dematerialised (Demat) account and a trading account which is the first step to investing in the stock market. A Demat account can virtually hold many instruments such as debt securities, government bonds, Exchange-Traded Funds (ETFs), mutual funds among others apart from shares.

Similar to a bank account, if you buy stocks of a company, the same will be credited to your Demat account. If you place a sell order, stocks will be debited from your Demat account. There are three types of Demat Account: Regular Demat account, Repatriable Demat account and Non-repatriable Demat account.

Demat accounts are maintained by National Securities Depository Limited (NSDL) and Central Depositories Services Limited (CDSL). Stockbroking firms in India are registered with either of the depositories.

4 Steps to Choose Best Demat Account

The foremost criterion for choosing an ideal Demat account is the ease of opening and operating it. The Deposit Participant(s), must therefore make the first step as convenient as possible. For instance, a Demat account can be opened with ease via the e-KYC process, wherein the entire process is validated using the investor’s Aadhar data.

The e-KYC process, which helps investors open demat account online , eliminates the biggest headache for investors as it only requires them to do a final self-identification either through an in-person verification or online through a video camera. However, you must carry out trade in less than two days of opening the account. In case the account is opened offline the trade must be conducted in less than five days.

Basic Services Demat account:

Security and Exchange Board of India (SEBI) mandates every Deposit Participant(s) to provide investors with the Basic Services Demat Account (BSDA).

A Basic Services Demat Account makes for one of the best demat accounts in India as it provides some basic services at reduced cost. Retail investors have an option to use these no-frills or basic demat accounts.

Charges of a Demat account

A key point to consider while choosing an ideal Demat account among numerous others is the demat account charges and price point of a DP. These charges may be a significant part of your overall returns, therefore, you must know which DP does not charge a fee for opening a Demat account and which one has a high fee for the same.

Points to compare

• Annual maintenance charges that investors are required to pay every year.
• A fee is charged on every debit from your demat account.
• Your request for a physical copy of your demat holding or physical transaction copy is also chargeable.
• You are required to pay if your Debit instruction Slip – DIS or Demat Request form – DRF is rejected.
• Some DPs also charge for converting the share certificates from a physical form to electronic.
• In a BSDA account, if your account value is up to Rs 50,000, there will be no amount levied for AMC and if the value of our holding falls between Rs 50,001 to Rs 2,00,000, the AMC fee will amount to Rs 100.
• Some DPs also provide zero AMC demat accounts, wherein they waive the AMC charges.

The interface between Broking and Banking

Another criterion for choosing an ideal demat account should be the interface between your broking and your banking account. Online trading requires a smooth trading app and a proper linkage of your demat and trading account with your bank account. Options such as 2-in-1 accounts or 3-in-1 accounts can be availed by the investors for added ease. The latter link your bank account, your demat account and your trading account. This is offered by brokers who have group banking licences. The 2-in-1 account allows money transfer and a link between the trading and demat account.

Data Analytics

DPs provide several online data analytics like real-time valuation, direct call to action requests for a trading client, among others. They are integrated with external factors which play a vital role in the performance of a share such as social and economic trends within the economy, all of which helps in decision making. Services like data analytics is an important criterion to choose the best demat account in India.

Conclusion

Several factors must be considered before you open a demat account online. The demat account you open must be known for the quality of its services, security of transitions and very low customer complaints. Trading through the assistance of versatile Depository Participants is a secure method. IIFL provides an all-in-one account through which you can trade in multiple securities online from anywhere and offers the accounts that are ideal and comprehensive for every investor need.