Opening Demat account is the initial step required before you can start investing in Nepal Stock Market.
Have you ever heard your friend talking about IPOs, NEPSE, hydropower or commercial bank shares? Terms like BOID, CDSC and MeroShare can sound a bit intimidating at first but the whole process of demat account opening is actually quite simple and straight forward as long as you follow each step properly.
Before buying shares or applying for an IPO, you will need a Demat account – here’s how you can open one in Nepal.
What Is a Demat Account?
A Demat account is where your physical shares, debentures and mutual funds are converted into an electronic form and stored. ‘Dematerialized’ is the source of the word Demat, which means to convert physical proof of ownership into an electronic equivalent.
Physical share certificates could get damaged, damp, or even stolen. Demat account, on the other hand, stores your shareholdings in a digital environment eliminating the fear of losing them.
CDSC (Central Depository System and Clearing Limited) is the organization that maintains the central share registry of Nepal. To buy shares from a stock exchange through IPOs, you need a Demat account.
Steps Involved In Opening Demat Account:
1. Choosing the Depository Participants
You can’t open a Demat account directly with CDSC; you need a Depository Participant (DP) for that. A DP could be a commercial bank, development bank, financial institution or a merchant banking company approved by the Securities Board of Nepal (SEBON).
Pick a bank or capital company with which you already have an existing relationship. Having a saving account with the same bank will make fund transfers and payment of dividends easier. If you choose a bank that has a branch near you, it would be easier for you to submit your documents and in case of any issues with the account opening.
2. Preparing the Necessary Documents
Like any other bank account opening procedure, you also need to submit certain documents to open a Demat account. Prepare the following documents:
• Citizenship certificate: You will have to submit a photocopy and also bring the original with you for verification purposes
• Passport size photos: Almost all institutions require two passport-size photos
• An active bank account: You can fund your IPO applications and other purchases through this
• Know Your Client (KYC) or other personal documents: You will have to fill up personal information like father’s name, grandfather’s name or your spouse’s name, their contact information and address
In case of a minor’s Demat account opening, the institution might require a birth certificate and documents regarding the legal guardian of the child.
3. Applying and Paying the Charges
You can apply online through your preferred bank or capital company. You can also visit the branch and fill up the application form:
• Fill up the form
Fill the Demat account opening form and the Know Your Customer (KYC) form. Before you submit the form, make sure you double-check all the information filled. The name mentioned in the form should match the name mentioned in your citizenship certificate.
• Pay the charges
Demat account charges are minimal. Most DPs only charge an annual maintenance charge (AMC) of NPR 100-200. You might be asked to pay an additional Demat account opening charge.
The DP will look over the details and documents you submitted. They will inform you of your successful account approval within 1-3 working days.
4. Getting Assigned a BOID Number
Upon approval of your Demat account, the DP will assign you a 16-digit BOID number.
BOID stands for Beneficial Owner Identification, which is like the account number of your Demat account. You will be required to cite this number while applying for IPOs, shares, debentures, etc. As it is your primary source of identification with the stock exchange, it is best to save the number in a safe place.
5. Activating MeroShare and Linking a Bank Account
A Demat account is used for storing shares. MeroShare allows you to view and monitor the shares in your Demat account.
1. Request Activation for MeroShare
Ask the DP to activate your MeroShare. They will then assign a user ID and a temporary password to you. These are usually sent to your registered e-mail or phone number.
2. Logging in to the MeroShare
Go to MeroShare website or application and select your DP, entering your log-in credentials. From here, you can set up a new password for your MeroShare account.
After logging in, you can view your balances and other details pertaining to your Demat account.
3. Activating ASBA
Through MeroShare, you can apply for IPOs, rights shares, and debentures. ASBA stands for Application Supported by Blocked Amount. A specified amount of money will be kept blocked in your bank account as long as the IPO remains open.
Once you submit an IPO application successfully, the blocked amount will be debited from your bank account. If the IPO isn’t successfully submitted, the bank will unblock the money again.
Frequently Asked Questions
Can I open more than one Demat account in Nepal?
Yes, you can open more than one Demat account either with the same or with different DPs. However, it’s easier to manage a single Demat account – and you won’t have to worry about paying multiple annual maintenance charges.
Can I apply for IPOs without MeroShare?
MeroShare is the easiest way to apply for IPOs. Your Demat account is required to receive the shares allotted to you, whereas MeroShare will be used to apply for the IPO.
However, if you do not have MeroShare, you can apply for IPOs through your bank, which would be a longer and more tiresome process.
What Happens If I Do Not Pay the Annual Maintenance Charge for my Demat Account?
Your DP might freeze your Demat account if you do not pay the annual maintenance (AMC). As a result, you will not be able to apply for the IPO or even sell shares until the account is unfrozen. You will have to contact the DP and ask them how to unfreeze the account by paying the maintenance charge.
Conclusion
Opening a Demat account in Nepal is actually quite simple. Just make sure to go through each step of the process thoroughly. Pick an approved DP, prepare the required documents, fill up the KYC form and make the necessary payments.
Once your BOID is ready and your MeroShare is activated, you can start investing by applying for IPOs online and managing your shares. Make sure to keep your password safe and always remember to pay your annual maintenance charge.