If you are new to this concept, some of the basic questions have been answered below:
What is Demat Account?
An account to hold your securities (like Shares, Bonds etc.) in electronic form.
What is Depository?
A "Depository" is a facility for holding securities, which enables securities transactions to be processed by book entry. A depository is an organization (i.e. CDSL in our case), which holds the beneficial owner's securities in electronic form, through a registered Depository Participant (DP) (i.e. Karnataka Bank). To avail of the services offered by a depository, the investor has to open an account with a registered DP.
The Depositories in India & Regulators:
There are two depositories in India - Central Depository Services (India) Limited (CDSL) & and National Securities Depository Limited (NSDL).
Securities and Exchange Board of India (SEBI) is the regulating authority and it governs the functioning of these depositories.
Services offered by Depositories:
Depositories offer the following services to the investors through its Depository Participants:
- Dematerialisation-Process of converting physical securities into electronic form.
- Rematerialisation- Process of converting electronic securities back into physical securities.
- Maintain the holdings in electronic form.
- Effecting the settlement of securities traded on the stock exchanges.
- Effecting the settlement of trades not done through stock exchanges i.e. off-market trades.
- Enable the electronic credit in case of Public Issues (like IPO/FPO/Rights Issue etc.).
- Enable the non – cash Corporate Action benefit such as bonus shares and rights etc. in the electronic form.
- Enable pledge dematerialized securities.
- Facilitate Securities Lending and Borrowing.
Who is a Depository Participant (DP)?
A "Depository Participant" (DP) is an agent of the depository who is authorised to offer depository services to investors. Financial institutions, banks, custodians and stockbrokers complying with the requirements prescribed by SEBI/ Depositories can be registered as DP.
Who is a Beneficial Owner (BO)?
"Beneficial Owner" is a person, in whose name a Demat Account is opened with CDSL for the purpose of holding securities in the electronic form and whose name is recorded as such with CDSL. (Simply Demat Account Holder).
Benefit to the investor in the Depository mode:
- Reduced paper work.
- No risk of loss, mutilation or theft of share certificates.
- Fast settlement cycles.
- No stamp duty for transfer of shares.
- Low transaction cost for buying and selling in the dematerialized segment.
- Pay– in and pay–out of securities on the same day.
- No bad deliveries.
- Increase in the liquidity of securities because of faster transfer and registration of securities in the account.
- Instant disbursement of non–cash corporate action benefits like bonus and rights into the account.
- Regular account status updates available from the DP at any point of time.
What is Dematerialisation?
Dematerialisation is the process of converting physical shares (share certificates) into an electronic form. Shares once converted into dematerialized form, are held in a Demat account.
What is Rematerialisation?
The process of getting the securities in an electronic form, converted back into the physical form is known as Rematerialisation. An investor can rematerialize his shares by filling in a Remat Request Form (RRF).
Processing Delivery & Receipt Instructions:
To settle trades done on a stock exchange (on-market trades) and trades, which are directly settled between two BOs (off-market trades), BOs submit duly completed delivery instructions in the prescribed form to DP. For receipt of securities into his/her account, a BO can give one time "standing instruction" to DP. Once such a standing instruction is given to the DP, there is no need to submit separate instructions for receipt every time the investor buys securities.
If the BO decides to pledge any securities in his BO account, he can avail of the same by submitting the pledge request form duly completed, to his DP.
Individual BOs have a facility for nomination in favour of an individual. If the sole or all the joint holders are deceased, the shares of different companies held in the Demat account will be transmitted easily to the demat account of the nominee on submission of the death certificate and transmission form. It may be noted that in the event of the death of one of the joint holders, the securities will be transmitted in the demat account of the surviving holders.
Transmission of securities
A facility for transmission of balances held in BO account/s (to other BO account/s) if so required due to death, lunacy, bankruptcy, insolvency or required due to operation of any law.
Change in Address
A BO who wishes to register his change in address submits his/her request in writing to his/her DP. The changes entered by the DP in the CDSL system will be automatically downloaded to all the companies in which the BO is holding securities. This facility saves money, time and effort for the BO.
Free Facilities by CDSL to its Demat Account Holders:
In the reduced settlement cycle era, investors require updated demat account information at a much faster pace than ever before. In other words, the quest for account status information has risen manifold.
In order to facilitate a CDSL Demat account holder to easily adapt to the fast reducing settlement cycle, CDSL has introduced Internet-enabled services called "easi" and "easiest" to empower a Demat account holder in managing his securities 'anytime-anywhere' in an efficient and convenient manner, all in a state-of-the-art secure environment. Further to effective risk control mechanism for monitoring of Demat account, CDSL has also introduced "smart" facility (SMS alert).
To know more on "easi" ,"easiest" and "smart" - http://www.cdslindia.com
FAQ on DP Services - http://www.cdslindia.com/faq/main.htm
Important message to the Investors/Demat account holders:
No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the ASBA application form (Application Supported by Blocked Amount) to authorise your bank to make payment in case of allotment. No need to worry about refund, as the money remains in investor's account. Kindly update your Mobile Number with us and prevent unauthorized transactions in your Demat account. Receive alerts on your Registered Mobile for all debit and other important transactions in your Demat account directly from CDSL on the same day.
KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary.
Charges/Tariff for Demat Services
Rajiv Gandhi Equity Savings Scheme,2013(RGESS)