The stock market has seen a trade storm in the past few years, in India. More millennials are catching the momentum. The Securities and Exchange Board of India (SEBI) and depositories keep working towards managing the trading activities as per the compliance regulations. It is more necessary with the rise in demat accounts.
Recent data from depositories show that more and more people are glancing at the stock market investments. In the post-pandemic era, data from the depositories shows that the number of demat accounts has jumped 2.2 times, and combined assets under custody (AUC) has also doubled.
KYC Documentation for Demat Account Opening
To open a demat account, you need to complete the documentation process with stockbrokers prescribed by the SEBI.
According to the SEBI, investors need to submit six attributes to complete the know-your-customer (KYC) compliance that may change over time. Therefore, it is necessary for investors to keep the KYC information updated.
KYC attributes that an individual needs to comply with are as follows:
- a) Name
- b) Residence
- c) Permanent Account Number (PAN)
- d) Active mobile number
- e) Active Email ID
- f) Income Range
KYC compliance is necessary as it helps the regulators to provide security to demat accounts.
KYC Updation – Extension By SEBI
Recently, the SEBI extended the previously specified deadline for investors to complete demat and trading account KYC compliance. It was the step after finding many accounts that were not KYC compliant till March 31 2022. Therefore, it extended the deadline to June 30 2022, to update the required information. Later the last date to update KYC was extended to July 03, 2022. However, still, KYC has not been updated for all demat accounts. Till this deadline, all non-KYC compliant demat and trading accounts were active. After that, exchanges blocked the non-compliant accounts.
In case you have not submitted your KYC documents yet; still, you can complete the process. The demat account will be activated once you submit the deficient KYC details. However, the broker may charge a minimal fee to keep your accounts active. With updated account information, you would be able to continue trading on the stock exchange using the same account.
If you are new to stock investing, let us familiarise you with the demat account and trading account usage, the difference between demat and trading account, and how to open a demat account online.
What is the difference between Demat and Trading Account?
- Demat Account: A demat account is a safe repository for all the financial securities you invest in, such as stocks, mutual funds, bonds, derivatives, etc. One can understand it like a bank account. It holds financial securities instead of money and allows account holders to track all those securities. The account gets debited or credited based on your selling or buying trades on stock exchanges.
- Trading Account: A trading account is an account to make buy/sell trades for shares, mutual fund units, futures, and options at the respective stock exchanges. It is one-point access to major formal multiple exchanges, like NSE, BSE, MCX, etc., using the broker’s trading platform.
Trading accounts and demat accounts are different in nature but work together for convenient online trading. A demat account is mandatory for long-term investing. Options traders and day traders can skip demat accounts as they need not take delivery of assets. On the other hand, a trading account is mandatory for all traders.
How to Open a Demat Account Online
Opening a demat account online is an easy task. Find a SEBI-registered stockbroker offering a free demat account and demat services at lower annual maintenance charges (AMC), custody charges, and transaction fees. You can look for a reputed discount broker.
Access the account opening form after selecting a subscription-based brokerage plan at the broker’s official website. Input the required personal details and income details. Upload the KYC documents and submit the form for further verification by the broker. It will verify your details and documents and activate your demat account. Many brokers allow you to start investing on the same day you activate the demat account.
Thus, to ensure smooth settlement, you ensure that both your demat and trading accounts are KYC compliant as per the regulatory guidelines issued from time to time.
Read also: How to Spot an Undervalued Stock
