Previously, to invest in any security in the nation, investors had to obtain physical copies of the share certificates. These tangible copies were once used by investors to transact on the stock market. Currently, investors have electronic access to a variety of investments, including bonds, exchange-traded funds (ETFs), mutual funds, equity shares, and debentures. In light of this technologically enabled shift, demat accounts have seen a sharp increase in popularity in recent years. Having a demat account is now crucial if you want to invest in equity, or shares. There were 12.7 crore demat accounts in India as of August 2023.
Demat Account Rules
In general, parents invest large sums of money in various locations to ensure their children have a secure future, but this trend is quickly shifting today. For their children’s future, parents are putting money into the stock market, which has the potential to yield large returns quickly. You will also need to open a demat account if you wish to invest in the stock market. Minors under the age of 18 are permitted to open a demat account through the Securities and Exchange Board of India, or SEBI, but their parents must manage this account. Per the guidelines, the parents may only manage this account up until the minor’s eighteenth birthday.
Which official documents are required?
PAN Card (Parent or Guardian).
Residence Certificate (Parents or Guardians) – Aadhar Card, Passport, Driver’s License, Voter ID Card or any other document will be valid.
Passport size photographs of parents and minor.
The birth certificate of the minor, date of birth and names of parents should be clearly mentioned.
How does one open a demat account for a minor?
Selecting a Depository Participant (DP) to open the account with is the first step. It will serve as a liaison between the investor and the location of the money’s investment. In India, DP can be any financial institution, including banks.
The minor’s and parents’ necessary KYC information will be entered into the account opening form.
The DP will receive the necessary paperwork and a passport-sized photo (Banks or Financial Institutions).
There will be a personal verification process after this.
The customer ID and account number will be given by the DP once verification is complete.
Remember that if a minor opens a demat account, only their parents or legal guardians will be able to access the account until the minor turns eighteen.
