A demat account is an electronic account that holds an investor's shares, bonds, An exchange traded fund is a mutual fund scheme with units listed on a stock exchange, built to follow an index or an asset such as gold. Read the full meaning of ETF and mutual fund units in digital form, in place of paper certificates. It is opened through a SEBI is the statutory regulator of India's securities market, with the legal duty to protect investors and to promote and regulate that market. Read the full meaning of SEBI registered broker or bank, and the ownership is recorded with one of India's two depositories, NSDL or CDSL.
For a first time investor asking what is a demat account, the basic idea is that there are no physical certificates to store or hand over. Equities, debentures, ETFs and mutual fund units can all be held in same account as electronic entries. Both depositories are regulated by SEBI. The broker or bank that opens and services the account is called a depository participant (DP).
Opening and numbering an account
At CDSL, the account number is a 16 digit beneficial owner identification (BO ID) number, and the DP ID has 8 digits. At NSDL, the number is "IN" followed by 14 digits, and the DP ID has 6 digits.
The Basic Services Demat Account (BSDA) was introduced by SEBI in 2012 as a low cost option for retail investors. For an individual holding securities worth Rs 3 lakh in a BSDA, the annual maintenance charge (AMC) will be Rs 0, and for holdings of Rs 8 lakh there will be an AMC of Rs 100. These limits are set by SEBI for BSDA holders.
Why it matters, and the trading account mix-up
Under the The process in which a bank or other regulated entity collects and verifies a customer's identity, address and financial status before opening an account. Read the full meaning of KYC rules, a demat account must be linked to the investor's PAN. One PAN can be linked to several demat accounts across the depositories.
SEBI also requires every investor to either nominate a person or formally opt out of nomination. Since a SEBI circular of 10 June 2024, an account is not frozen if this choice is not made.
A demat account is often confused with a trading account, though the two have different work. The trading account places the buy or sell order, while the demat account stores the securities. An investor needs both to trade shares.