What is a Demat account? How to open one?

Demat account

If you have ever spoken to those involved in Nepal’s share market, you might have heard the term Demat account. But what is it and how do you get one?

Well for starters, a Demat account is an electronic account that holds securities such as shares, bonds, and other financial instruments in a dematerialised or electronic form. In Nepal, Demat mainly holds stocks, debentures and mutual fund units.

Since its inception in 2014, the Demat account has replaced physical share certificates, enabling investors and traders to conduct electronic transactions for buying, selling, and transferring shares. Now people can set up an account at a Depository Participant. This, over the long run, has benefited the Nepal Stock Exchange over the long term.

Choose a Depository Participant (DP)

Nepal Stock Exchange (NEPSE), Nepal's only stock market or share market
Nepal Stock Exchange (NEPSE), Nepal’s only stock market

A Depository Participant is a financial institution that acts as an intermediary between the investor and the central depository. The Central Depository System and Clearing Ltd. (CDSC) is the central depository in Nepal. It operates as a subsidiary of Nepal Stock Exchange Ltd (NEPSE) and functions as per the securities regulations stipulated by the Securities Board of Nepal (SEBON).

You need to select a DP that is registered with the CDSC. There are 111 licensed DPs, you can choose any one of them and open an account.

How to open a Demat account

Firstly, you will need to fill out the account opening form. Complete the form, including the Know Your Customer (KYC) form and agreement with the DP or the bank that outlines the terms and conditions of the DMAT account. Make sure to provide accurate information and double-check all details before submission. Other documents you would require include:

   – Proof of identity (e.g., citizenship certificate, passport, driving license or any government-issued ID)

   – Proof of address (e.g., utility bill, bank statement)

   – Passport-sized photographs

   – PAN card (Permanent Account Number)

[Note: Specific requirements and procedures may vary slightly depending on the DP you choose.]

After verifying your documents and information, you will receive your DMAT account details, including your unique Beneficiary Owner Identification (BOID) number. 

Stock market - share market
Photo by Nimisha Mekala on Unsplash

FAQs about the Demat account

How are transactions conducted in a Demat account?

Transactions involve the buying and selling of securities through a stockbroker. When you buy securities, they are credited to your Demat account, and when you sell, they are debited.

How is a Demat account different from a trading account?

While a Demat account holds securities in electronic form, a trading account is used for buying and selling securities in the stock market. Investors typically have both a Demat account and a trading account for a complete trading and investment experience.

Can I have multiple Demat accounts?

Yes, an individual can have multiple Demat accounts, but each account must be with a different DP. In Nepal, you can have two different Demat accounts. However, having multiple accounts is not necessary for most investors. It is also not recommended to use different Demat accounts to buy or sell the same stocks/ IPOs in the stock market.

What is a BOID number?

BOID is a unique 16-digit identification number given to you when you open the Demat account, as described above. The first eight numbers represent your DP and the latter eight numbers represent your Client ID with the DP. In all transactions, one must mention their BOID number.

How much does it cost to open a Demat account?

Opening a Demat account requires charges such as account opening fees, annual maintenance charges, and transaction fees. However, the specific charges may vary among different Depository Participants.

React to this post


New Old Popular