The government is considering whether to allow a proposal that people opening savings bank accounts be automatically given a demat account, required for buying and selling shares, to reduce complications arising from stringent know your customer (KYC) norms.
“The issue is being looked into and was brought up in a recent meeting with finance minister Arun Jaitley too,” a financial ministry official told.
“It does not matter whether the demat account is active or not. This will ensure that all savings bank account holders have demat accounts and the process of opening these accounts would also become relatively simpler.” The government is keen to ensure that a larger chunk of household savings is directed into the stock market and this move may help that. At present, customers have to fill up an account opening form and provide extensive documentation to get a demat account.
A demat account is mandatory to carry out transactions in the stock exchange, as all shares are held in electronically. Physical shares are no longer issued. There is no rule minimum balance rule in demat accounts and about 45% of the accounts are dormant.
Though the demat account will come free, if the account holder operates it a fee would be charged.
“This is an issue which is being discussed that along with every bank account there could a demat account and this will also help in raising retail participation in the capital market,” VR Narasimhan, chief regulatory officer, National Stock Exchange said.
What is demat?
Demat account means a dematerialised account. It was introduced in 1996
It is used to invest in Indian financial and commodity markets
Stocks are kept electronically in your account, eliminating paper work.