Back in the day, the stock exchanges used to be very loud due to the outcry system. And the traders had to be physically present in order to carry out trades. But with time there have been various changes. Ever since the stock exchange has adopted the electronic method of transaction, things have become far simpler than what they used to be. Now it is possible to trade in the stock market while sitting under the roof of your own homes. An when it comes to online trading, there is one term that you hear very frequently: Demat Account. To the novice traders, the Demat account is a new term and there are various questions about it. Like, what is a Demat account? How to open Demat account? Can you hold multiple accounts? And so on. In this article, we will try to answer all these questions.
A Demat account is an account that is used to hold your shares and securities in an electronic format. It functions very similarly to a bank account. The process of converting physical securities to securities in an electronic format is known as Dematerialisation. Having an active Demat account is mandatory when it comes to trading, without it, you won’t be able to hold your securities. It also makes the trading process simpler.
The process of opening a Demat account is very simple. Contact a Depository Partner (DP) that is registered with the SEBI. Fill a form and submit all the documents. Once the verification is complete and the application is processed, you will be provided with a Demat account number and you can then start trading in the share market using your newly opened Demat account.
Indians being Indians, we almost always think having more than one of something is better than having just one of it. The question that is common amongst all of us is, can you hold multiple Demat accounts? The answer to this question is yes. Yes, you can hold multiple accounts attached to the same PAN card number and there are no rules against it. But there are a few things that you must know before opening them.
- It is completely legal to open multiple Demat as well as trading accounts but there is a condition attached to it. You cannot have multiple Demat accounts with the same Depository Participant. You will have to choose a different DP every time you open a new account.
- Charges and fees will be applicable to the Demat accounts individually. So be prepared to pay multiple Annual Maintenance Charges for all your account irrespective of them being idle or active.
- One of the major benefits of multiple accounts is for the individuals who are both traders as well as investors. Having multiple accounts helps them in keeping their trading and investing portfolios segregated.
- If you have multiple Demat accounts, make sure you do not keep them idle or unused for a longer period of time. In such instances, your account will be frozen and you will have to redo the entire KYC process to unfreeze it.
- By opening multiple Demat accounts you get services of multiple brokers. This means you get access to a variety of brokerage and research reports, a range of trading products, a variety of trading platforms, etc. Make sure to use all of this information in your favor.
- Opening multiple Demat accounts does not necessarily mean you compulsorily have to open multiple trading accounts as well.
- Having multiple Demat accounts means you will have to monitor all of the accounts on a regular basis for financial balances and transactions that are carried out. And that is a time consuming process.
Opening multiple Demat accounts is completely legal in India. And they have their pros as well as cons But before you decide to open them make sure you analyze their requirements thoroughly.
