Opening a Demat Account and Trading Account:

In order to start trading stocks in India, you must first register yourself with a stockbroker. Once done, the stockbroker they will guide you through on the opening of a trading account, demat account, and linking of your bank account.

The process is very easy and generally done in the backend by stock brokers. You don't have to worry about all these backend processes.

In India, the government has mandated two institutions for opening a demat account with, The National Securities Depository (“NSDL”) and The Central Depository Services (India) (“CDSL”). They act as the custodian of your dematerialized or electronic securities.

[Read More: NSDL vs CDSL: What is the difference? Which One is Better?].

Most of the reputed stock brokers register themselves as a Depository Participant (“DP”) and act as an agent under one of those above-mentioned depositories to provide quicker services available to the traders or investors. Effectively both of your trading account and demat account is maintained by your stockbroker (mostly through acting as 2 different entities).

Some smaller/new stockbrokers use the depository services from any other larger financial institutions and only provide the front end trading account.

As an investor, you don't need to worry about this, as this is processed solely in the backend by the broker. It takes an equal amount of time for shares to be deposited and withdrawn from the demat account in either case.

[Note: These days, most commercial banks started to provide a 3-in-1 account which combines a Trading, Demat, and Bank savings account. This is hassle-free and easier to open, but these banks usually have higher brokerage charges which lower your profit.]