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How to Transfer Shares from One Demat Account to Another? - YouTube
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The dematerialized account number is quoted for all transactions to enable electronic commerce settlement. Each shareholder will have a Dematerialized account for the purpose of transacting.

Access to a Dematerialized account requires an internet password and a transaction password. Securities transfers or purchases can then begin. Securities purchases and sales on Dematerialized accounts are automatically performed after the transaction is confirmed and completed.


Video Demat account



Advantages Demat

Account System

  • The bonus shares/rights allocated to investors will be credited to their account immediately. There is no risk of loss due to fire, theft, or mutilation. Transaction costs are usually lower than that in the physical segment.
  • Demat accounts also help avoid issues that are typically associated with physical share certificates.

For example: a delivery failure caused by a mismatch of signatures, postal delays, and loss of certificates during transit. Furthermore, this eliminates the risks associated with counterfeiting and because of the damaged share certificate.

  • The owner of the demat account also avoids stamp duty (as against the 0.5 percent paid on physical shares) and the filling of the deed of transfer.
  • The biggest advantage of having a demat account is that you do not have to pay for a cap because it's stored electronically that reduces transaction costs.

Maps Demat account



Demat system motive

India adopts SAVE ACCOUNT for electronic storage, in which stocks and securities are represented and maintained electronically, thus eliminating problems associated with paper stock. After the introduction of storage systems by the 1996 Storage Act, the process of selling, purchasing and transfer of shares became easier and most of the risks associated with paper certificates were reduced.

In 1996, trading began on the NSE for shares held in the form of demat accounts. It was the beginning of a new paperless trading stock market trading environment. If an investor buys a stock today, he gets a credit to the investor account within two days. Today, stocks are transferred to investor demat accounts.

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The benefits of the Demat system

Demat account for stocks and securities with business objectives

The benefits of demat are as follows:

  • An easy and convenient way to store securities
  • Transfer securities immediately
  • There is no stamp duty for securities transfers
  • Safer than paper-sharing (previous risks associated with physical certificates like bad delivery, fake securities, delays, thefts, etc. are largely omitted)
  • Document reduction for securities transfers
  • Reduce transaction costs
  • The "odd lot" issue: even one section can be sold
  • The change of registered address with the participant Depository (DP) is registered with all companies where investors hold securities that eliminate the need to adapt to each separately.
  • Securities transmissions are performed by DP, eliminating the need to notify the company.
  • Auto credits to demat accounts for shares arising from bonus/split, consolidation/merger, etc.
  • A single demat account can withhold investment in both equity and debt instruments.
  • Merchants can work from anywhere (eg from home).
Benefits for the company

Storage systems help reduce the cost of new problems due to lower printing and distribution costs. This improves efficiency

 applicants and transfer agents and corporate secretarial departments. It provides better facilities for timely communication and services to shareholders and investors.  

Benefits to investors: The storage system reduces the risks involved in holding a physical certificate, for example, loss, theft, mutilation, counterfeiting, etc. This ensures completion of transfers and reduces delays in stock registration. This ensures faster communication to investors. This helps avoid bad delivery problems due to signature differences, etc. This ensures a faster payment of stock sales. No stamp duty is paid on stock transfer. This gives more acceptability and liquidity of the securities.

Benefits for broker

This reduces the risk of a pending settlement. This ensures a greater profit due to an increase in trading volume. This eliminates the possibility of counterfeiting or bad delivery. This improves trade and overall profitability. This increases trust in their investors.

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Depository Participant (DP)

Depository (in simplest terms) is an institution that holds a collection of pre-verified stocks held in an electronic mode that offers an efficient transaction settlement. Participant Depository (DP) is an intermediary between investor and depository. DPs are usually financial organizations such as banks, brokers, financial institutions, or custodians who act as depository agents to provide services to investors. Each DP is assigned a unique identification number known as DP-ID. As of March 2006, there are a total of 538 DP registered with SEBI.,

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Convert Demat

Changing the physical records of investments into electronic records is called the "dematerialization" of securities. For the dematerialise of physical securities, an investor must fill out Demat Demand Form (DRF), which is available with the DP and submit the same along with a physical certificate. Each security has an ISIN (International Securities Identification Number). A separate DRF must be filled for each ISIN.

The complete dematerialization process is described below:

  • The investor submits the certificate for dematerialization to the DP.
  • DP updated investor account.
  • Demat accounts are managed by NSDL (National Securities Depository Limited) and CDSL (Central Depository Services Limited) and the bank acts as an intermediary.

7 Easy Steps to Open Zerodha Demat Account using Aadhaar
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Demat options

There are hundreds of Depository Participants (DPs) who offer Demat account facility in India as of September 2011. The cost comparison charged by different DPs is detailed below.

There are several advantages of having a bank as a DP. Having a Demat account with a DP bank, usually provides quick processing, accessibility, convenience, and online transaction capabilities to investors. Generally, banks credit Demat accounts with shares in the case of a purchase, or credit a savings account with the proceeds of sale, on the third day. Banks are also profitable because of the number of branches they own. Some banks offer the option of opening demat accounts in any branch, while others limit themselves to certain branches. Some private banks also provide online access to demat accounts. Therefore, investors can easily check the online details of their holdings, transactions and demand status through their bank's net banking facility. The broker acting as DP may not be able to provide this service.

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Cost involved

There are four main costs that typically apply to a demat account: account opening fees, annual maintenance fees, custodial fees, and transaction fees. Costs for all fees vary from DP to DP.

Account opening fee

Depends on or may not be the opening account fee. Private banks, such as HDFC Bank and AXIS Bank, ICICI Bank, do not own it. However, players such as Elite's Wealth Adviser Ltd., Box Securities, Sushil Finance, Globe Capital, Karvy Consultants and Bajaj Capital Limited charge an opening fee. But at Ventura Securities ltd, Angel Broking and some other companies do not have an opening fee. The State of the Bank of India does not charge an account opening fee while other maintenance and transaction fees apply. Most players picked up this when reopening a demat account. However, Stock Holding Corporation offers a lifetime account opening fee, which allows investors to keep their accounts for a long period of time. This fee can also be refunded.

Annual maintenance costs

This is also known as the folio maintenance fee, and is generally picked up in advance. This is charged annually or monthly.

Transaction fee

Transaction fees are charged to credit/deposit securities to and from accounts every month. While some DPs, such as SBIs, charge a fixed fee per transaction, HDFC Bank and ICICI Bank pay the fee to the transaction value, which is subject to the minimum amount. The cost also differs based on the type of transaction (buy or sell). Some DPs only charge for debiting securities, while others charge a fee for both. Some DPs also charge investors even if the instruction to buy/sell fails or is rejected. In addition, service taxes are also charged by DP

In addition to other costs, the DP also charges a fee to convert shares from physical to electronic form or vice versa. These costs vary for demat (physic-to-electronic) demands and remat (electronic-to-physical). For demat transactions, some DPs charge a fixed fee per request in addition to variable costs per certificate, while others only charge a variable fee.

For example, Stock Holding Corporation has charged Rs 25 as a request fee and Rs 3 per certificate as variable cost. However, SBI only charges a variable fee, such as Rs 3 per certificate. The demand for rheumatism also has a load similar to that of demat. However, the variable costs for rheumatism are generally higher than demat.

Some additional features (usually offered by banks) are as follows. Some DPs offer trader-frequent accounts, where they charge traders often at rates lower than the standard cost. Toll account holders are usually required to pay a down payment for each account to be adjusted for various service charges. The account holder needs to increase the balance when it falls below a certain amount determined by the DP. However, if the holder also holds a savings account with the DP, they may authorize the debit to the DP to pay this fee. Finally, after selecting DP, it would be wise to keep all accounts with the DP, so tracking capital gains is easier. This is because when calculating the capital gain tax, the holding period will be determined by the DP, and the different DP follows a different method. For example, ICICI Bank uses the First in First Out (FIFO) method to calculate the holding period. Proof of acquisition cost will be the contract record. Capital profit calculation is accountable.

Indian Banking System First, the investor must approach the DP and fill out the account opening form. The account opening form must be supported by a copy of one of the documents approved to serve as proof of identity (POI) and proof of address (POA) as determined by SEBI. An investor must have his or her original PAN card at the time of account opening (effective mandate from 1 April 2006).

All applicants must bring original documents for verification by an authorized official of the depository participant, under his signature. Furthermore, the investor must sign an agreement with the DP in the standard format specified by the depository, detailing the rights and obligations of investors and the DP. DP must provide the investor with a copy of the agreement and a fee schedule for their future reference. DP will open an account on the system and provide an account number, also called BOID (Beneficiary Identification Number). DP may revise fees by giving 30 days notice prior. SEBI has rationalized the cost structure for dematerialisation by removing account opening fees, transaction fees for securities loans, and the cost of circular vide detention dated January 28, 2005.

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Documents required for Demat account

To open a Demat account, you must provide documents that meet the KYC norm requirements (Know Your Customer). You must sign a contract with a stockbroker. Generally documents are:

  • PAN (required)
  • Bank statement (last 3 months)
  • Proof of address
  • Return of Income Tax
  • Two color photos
  • Bank crossed check (if required)
  • KYC details
  • Aadhar Card

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Disadvantages of Demat

  • The securities trade may become out of control in the case of a materialized security.
  • It is the obligation of the capital market regulator to keep a close watch on trading in the materialized securities and ensure that trade does not act as a loss to investors.
  • For materialized securities, the role of major market players such as stockbrokers needs to be watched because they have the ability to manipulate the market.
  • Some of the regulatory frameworks must comply with, including the Laws, Regulations, and various Pending Rules from various deposits.
  • Agreements are included at various levels in the dematerialization process. This can cause concern to investors who want simplicity.
  • There is no provision to close a demat account, which has an illiquid share. The investor can not close the account and he and his successor must pay the fee to participants, such as annual folio fees, etc.
  • After liquidating ownership, many Indian investors do not close their dp accounts. They do not realize that DP charges fees on inactive accounts.

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Transfer Shares Between (DP Depository)

To transfer shares, an investor must fill one of two types of Storage Instruction Slip (DIS). The first check done is whether both Demat accounts are in the same storage area. There are two storage areas: (CDSL (Central Depository Service (India) Limited) and NSDL National Securities Depository Limited)). If both accounts are not on the same storage, the Inter-Deposit Slip (Inter DIS) must be filled in and submitted. As an example:

  • If there is a Demat account with CDSL and other Demat accounts with NSDL, then Inter-DIS is required. (In case the investor requires Inter-DIS, the investor should check with the broker, because the broker usually publishes Inter-DIS).
  • Now that the DIS has been properly defined, information relating to the transfer transaction must be entered: script name, INE number, quantity in words and numbers.
  • Finally, the investor must submit the DIS to the broker with the signature.
  • The transfer broker will accept that DIS is in duplicate and acknowledges a DIS receipt on a duplicate copy.

Investors must submit DIS when the market is open. Thus, the date of DIS submission and the date of DIS execution can be the same or a day difference is also acceptable. Investors also have to pay some broker fees for the transfer.

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References

  • Information on how to Open Demat Account

Source of the article : Wikipedia

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