Understanding KYC Requirements for Demat Account Apps

The process of Demat account opening online has become quite seamless of late. However, before you decide to take the plunge into the stock market by opening a Demat account, you must understand the importance of the KYC or Know Your Customer requirements associated with the account as well as Demat account apps.

In this blog, we will explore everything you need to know about the KYC process concerning your Demat account and why it is important. 

Understanding the Importance of KYC

It was in 2002 that the RBI or Reserve Bank of India introduced KYC in banks to protect them from being used for illegal activities like terror financing or laundering of money. With the help of the KYC, banks were able to understand their customers better and keep tabs on their financial activities. Seeing the success of KYC in banks, SEBI or the Securities and Exchange Board of India, the market regulator, decided to implement it for the investors in the securities market. This helps track the trading activities of investors better, thus ruling out or even mitigating any potential risks that their trading activities might pose.

KYC has now become a mandatory process that all investors or traders have to go through when they open a Demat account online and involves various steps. Some of the reasons why KYC is important for the securities market is because it helps in:

• Determining a customer’s identity

• Understanding the basis of every financial activity they might carry out

• Ensuring that the funds being exchanged are sourced legally 

KYC for Demat Account Apps

Seeing as KYC is necessary to open a Demat account and trade using Demat account apps, here’s a look as to why that is:

• Every transaction that a trader carries out in the stock market is linked between an investor’s PAN card and their bank account

• With the help of the KYC facility, if potential financial gaps exist, they will easily come to the fore as the KYC tracks every single rupee being traded in the market.  

• Thanks to this, illegal trading activities have been reduced greatly, thus promoting safer trading platforms, without interfering with issues like illegal funding/sponsoring, black money etc.

Steps in the KYC Process

Here’s a look at all the steps that are involved in the KYC process for Demat account apps:

1. Filling the KYC form:

The very first step involves filling up the KYC form. Traders and investors would need to provide details like their name, salary, profession, residential and office addresses etc. 

2. Submitting PAN card and Government-Authorised ID card copy:

Since you need to connect your banking account with your Demat account, submitting a copy of your PAN card is crucial. Other than this, traders will also need to submit ID proofs like a passport, Aadhar or license with the DP they have chosen to open their Demat account with. 

3. Bank Account Details Submission:

To finalize the process of connecting your bank account with your Demat account, you will need to submit either a cancelled cheque or a copy of your account’s passbook’s first page. Make sure that this page contains all the relevant details of your account.

4. Online Verification:

Once all the steps above are complete, you also have the facility of the E-signing in. In this step, you have to digitally sign the KYC document with your Aadhaar number. Post this, you will receive an OTP on your official registered number with Aadhaar, entering and submitting which will finalize your KYC.

Conclusion

The KYC process is a crucial step when you decide to indulge in the process of Demat account opening online. This holds even for zero brokerage trading app including the best apps for trading in India. This is why it is important to first understand the importance of KYC when it comes to your Demat account before you decide to step into the world of trading.