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Are you willing to try your hands on investment in stock markets? If yes, the first and foremost thing to do is to open a Demat account. In today’s fast-paced digital world, opening a Demat account has become quite easy. Today, even you can open a Demat account right from your smartphone without taking a step out. But despite these superior levels of ease, it is mandatory for the banks and Depository Participants (DPs) to follow stricter guidelines laid by the Securities and Exchange Board of India (SEBI). Now have a look on new demat account KYC rule by SEBI.
SEBI has laid out detailed guidelines in regard to Demat account opening along with its closing. And Know Your Customer (KYC) is an important part of the same.
Know your customer (KYC) is an essential requirement when it comes to opening a trading-cum-Demat account with a stock broker. The primary concept behind this is that an investor possesses all necessary documentation and the direction of funds can be checked through all the relevant banking channels. At present, it is mandatory for investors to open a Demat account without finishing their KYC as per the guidelines laid out by SEBI. All top brokers in India follow SEBI-stated guidelines in regard to Demat account opening.
When KYC is done, the date of stock investors gets saved in a centralized database and KYC needs to be done just once. Post that, it is just fetched from the centralized database by linking your PAN card. KYC is meant to help financial institutions to fetch their customer transaction details. This also helps in linking the entire capital market activity of investors with their respective bank accounts and tax submissions along with reporting-related gaps. SEBI has made KYC compliance mandatory for different types of investment accounts like Demat accounts, mutual fund accounts, and trading accounts.
Steps involved KYC verification during Demat account opening
Key steps in KYC documentation process for Demat account
- The initial stage is the filling of the KYC form. It means for new investors who are opening their Demat account for the first time. The application form has empty fields for details like name, residential details, office address, bank account information, account nomination, joint account holder details if any, etc.
- The next thing to do is to prove your identity by furnishing identity proof. Do remember that mentioning the PAN card details is mandatory. Besides the PAN card, people are typically asked to furnish additional government-certified proof such as a driving license, passport, Aadhaar, voter ID, etc.
- The third step is to give proof of residential address. The furnished document must feature the latest address in the precise form. Some of the appropriate documents under this category are utility bills company letter, bank statements, telephone bills, gas bills, etc.
- Eventually, people would have to submit a copy of the cancelled cheque with the account holder’s name precisely stamped on the cheque leaf. This step is meant to verify the IFSC code and other account details.
Though one can submit photocopies of any of these documents during KYC, it is advisable to carry the originals for quick verification.
SEBI guidelines for Opening a Demat account
To ensure a smoother account opening process and the submission of trustworthy information, there are specific documents that need to be submitted. They include:
– A duly filled application form
– Address proof
– Identity proof
– PAN card
– Bank Statement to link to one’s bank account
According to SEBI, a person is obliged to furnish all these documents to their chosen top brokers in India or depository participant. A Demat account can only be opened after the successful completion of the KYC process. Even, if a person wants to open multiple Demat accounts with the same DIP/broker or different ones, KYC norms remain the same for all the accounts. The major documents include Identity proof, address proof, PAN card, canceled cheques, and others.
SEBI guidelines for closing a Demat account
The most important thing to note here is that there are no tough norms stated by SEBI in regard to the closing of the best Demat account in India. However, some steps must need to be taken there.
A typical Demat account closing procedure would include the following steps:
– Fill out the account closing form.
– Provide the necessary details like your DP’s ID, your Client ID, as well as any asked information about other things.
– Mention the reason behind closing your account.
– Given the remaining account balance at that time, any balance in your Demat account will be shifted.
– The account closing procedure generally takes 7 to 10 days. Make sure there are no remaining dues before you close your account, or your DP is bound to keep your account functional.
The Conclusion
At a time when so many people are joining the stock investment bandwagon, it is necessary for them to have complete details about the Demat account opening process and the importance of KYC in the overall process.
