KYC NORMS FOR OPENING DEMAT ACCOUNT

A demat account is perhaps the single-most essential thing that you need to trade or invest in the market. Thanks to the advent of digitalisation in the late 1990s, a single account has been deemed sufficient to buy, sell, hold and transfer shares without the slightest risk of loss or theft. Dematerialisation has also ensured that traders and investors have saved a lot of their time and effort and spent them more optimally in researching the market for new opportunities.

Transacting in shares and securities in a demat mode has become the norm of the day. However, in order to make the most of such unique advantages of a demat account, one must open it by following all the given instructions. And a very crucial part of this is to fulfil all the required KYC norms.

What are KYC norms?

KYC is, of course, short for Know Your Customer. In 2002, the Reserve Bank of India established the first ever KYC norms. These were adopted by the Securities and Exchange Board of India (SEBI) to be applicable for all equity-related investments and online trading functions, including demat account opening.

Therefore, in line with these norms, to open demat account, a trader or investor needs to submit the requisite documents. By doing this and thus fulfilling the KYC norms, one’s investing and trading experience is secured further by better transparency and safer accessibility. Any fraudulent or suspicious activity can be traced without any hassles, and the remedial steps can be taken immediately without any delay to minimize loss or financial damage.

What are the documents required for a demat account?

Below is a list of documents that are needed for demat account opening and validation.

1. Account Opening Form:

The opening form of a demat account means the application form that is filled either physically or digitally to open demat account. This ideally contains all the necessary demat account information, including the personal and banking details of the individual. When being submitted for KYC purposes, the account opening form also should have the photograph and signature of the primary account holder.

2. Proof of Identity:

There is a list of documents that are considered as valid Proof of Identity. Your PAN card is mandatory, except for the below categories:

1. Traders relating to a specific income slab as per Section 139A

2. Traders resident of Sikkim state

3. Transactions done on behalf of Central or State governments or by officials appointed by Indian courts

You can submit ANY one document of the following:

1. Valid Driving License

2. Voter’s ID Card

3. Passport

4. Unique Identification Number (UID) – Aadhaar

5. Any Identity Card or document with the applicant’s photograph, issued by Central / State Government, government departments, professional bodies such as ICAI, ICWAI, ICSI, Statutory / Regulatory Authorities, Public Sector Undertakings, Bar Council etc, to their members, Public / Financial institutions, Scheduled Commercial Banks, colleges affiliated to Universities and debit cards / credit cards issued by banks

3. Proof of Address:

You can submit ANY one document of the following:

1.Valid Driving License

2.Voter’s ID Card

3. Passport

4. Utility Bill like telephone bills (landline only), electricity bill or gas bill – Not more than 3 months old

5. Sale Agreement of Residence or Registered Lease

6. Bank Account Passbook/Statement

7. Any Identity Card or document with the applicant’s photograph, issued by Central / State Government, government departments, professional bodies such as ICAI, ICWAI, ICSI, Statutory / Regulatory Authorities, Public Sector Undertakings, Bar Council etc, to their members, Public / Financial institutions, Scheduled Commercial Banks, colleges affiliated to Universities

4. Other Documents:

Bank Account Details – An original cancelled cheque that bears your printed name, account number, MICR code, IFSC code and bank and branch details

It is also necessary to provide proof of income or the net worth of the applicant if the latter wishes to invest in derivatives or the commodities market. This can be furnished by submitting any of the following documents:

1. IT Acknowledgement Copy

2. Form 16

3. Bank Statement for last 6 months

4. Stock Holding Statement

5. Net Worth Certificate provided by a verified Chartered Accountant

Some Points to Note

1. If the primary account holder is a minor, the account opening form will contain the details of the parent or guardian along with the same’s signature, personal information, and respective documents.

2. A Power of Attorney is to be appointed by a NRI investor for carrying out transactions.

3. Photocopies of all documents mentioned above have to be submitted for opening a demat or trading account.

Since SEBI has made it compulsory for all traders and investors to comply with KYC norms, it is necessary that you too comply with the same so that there are no hassles or hurdles in your account opening experience or even in your trading and investing journey in future.