Demat account KYC: Why it matters more than ever for Indian investors

New Delhi, Jul 5, 2024 

Every single transaction that is made in the stock market is linked to your demat account and your PAN card

As the stock market attracts more retail investors, the importance of Know Your Customer (KYC) compliance in demat account opening has become critical. KYC is a mandatory requirement set by the Securities and Exchange Board of India (SEBI) to ensure the integrity and security of the financial system.

The purpose of KYC compliance:

Regulatory compliance: KYC is a regulatory requirement to check money laundering, fraud, and other financial crimes. It helps regulators track the flow of funds and ensure the legitimacy of investment activities.

Identity verification: KYC documentation, such as identity and address proof, helps stockbrokers and depositories authenticate the investor's identity and prevent the misuse of accounts.

Transparency and traceability: KYC enables the tracking of financial transactions, making it easier for authorities to identify any discrepancies or suspicious activities. This enhances the overall transparency and accountability of the financial system.

Fintech companies are responding to the need for efficient KYC processes. HDFC SKY, for instance, has introduced a streamlined demat account opening procedure that integrates KYC verification. The process, which can be completed entirely through a mobile app, includes PAN card verification, video KYC, and bank account linking.

“We've designed our system to make KYC compliance as user-friendly as possible,” a HDFC SKY representative was quoted as saying in a statement. “Our goal is to lower the barriers to entry for new investors while maintaining the highest standards of security.”

KYC compliance also facilitates smoother tax filing processes, as transactions are automatically recorded against an investor's PAN card. This automation can significantly reduce the time and effort required during tax season.

How to open a demat account with KYC

Get started by downloading your preferred broking app from Google Play Store or Apple App Store.

Sign up and verification:

Sign up with your email ID, address, and mobile number. Verify the details with a 4-digit OTP sent to your phone.

KYC process:

• Enter your PAN card details and date of birth to initiate KYC.

• Upload a clear picture of the front side of your PAN card.

• Provide your personal details as requested in the app.

• Complete a quick video KYC by uploading a selfie.

• Provide any additional personal details and nominee information (optional).

Bank account linking:

Verify your bank details with a Rs 1 transaction to make sure that there will be a smooth transfer of funds between your bank account and your Demat account.

Choose your investment options:

Select your preferred stock exchange (NSE/BSE) and trading segment (equity, derivatives, etc.). If you're interested in F&O trading, you'll need to upload additional documents.

Upload your signature and complete the e-sign process using your Aadhaar OTP. Accept the terms and conditions.

Your demat account with the KYC verification process is complete.

[The Business Standard]