NISM-Series-VI: Depository Operations · Functions of Depository Participant - Account Operations

Types of Demat Accounts and Account Opening Procedure

Updated 11 October 2026 · Fact-checked

A demat account, called a beneficial owner (BO) account, holds securities in electronic form with a depository participant (DP). Types include regular, basic services demat account (BSDA), repatriable and non-repatriable accounts. To open one, you complete KYC, fill the account opening form and sign the DP-BO agreement.

Understand Types of Demat Accounts and Account Opening

A demat account is the account in which an investor holds securities electronically. The investor is called the beneficial owner (BO), because the depository is the registered owner in the issuer's books but the investor enjoys the benefits. The account is opened with a depository participant (DP), which acts as the agent of the depository.

Accounts differ by who holds them and what facilities they get. A regular account has no special limits. A basic services demat account (BSDA) is a low-cost option for small investors, with lower charges but a cap on the value of securities held. Residents and non-residents also use different accounts. A non-resident Indian (NRI) can hold a repatriable account, where sale proceeds can be sent abroad, or a non-repatriable account, where proceeds go to an NRI rupee account in India and are not freely sent abroad.

Before opening, the DP must complete KYC (know your customer). The investor must give proof of identity, proof of address and a PAN, with the details verified against originals or through an approved electronic method. Exemptions from PAN apply only in a few specified cases, so do not assume PAN is optional.

The investor then fills the account opening form and signs the DP-BO agreement. This agreement sets out the rights and duties of both sides. It is a standard-form agreement under the depository regulations, and the DP cannot add terms that go against it. The investor must be given a copy of the signed documents, and the DP must issue the account details after verification.

In the exam, questions test who may open which account, the limits and conditions of BSDA, the KYC documents, and what the agreement does. Learn the exact terms and the trap options.

Key formulas to remember

BO account holder: Beneficial owner = investor; registered owner in issuer's books = depository; Do not confuse the two roles. The BO enjoys the benefits of ownership.
BSDA eligibility: BSDA is for individuals, singly or jointly (up to 2 holders); each holder must have only one demat account across all depositories, and that account is the BSDA; Check the current limit in your NISM workbook. BSDA is for small investors and limits the value of securities held. Companies and HUFs are not eligible.
BSDA holding limit: Value of securities in BSDA ≤ the limit set in the current SEBI circular (limits for debt and non-debt securities may differ); Do not memorise a figure from old material. Verify against your latest workbook edition, as SEBI has revised the limits. If the limit is crossed, the account is treated as a regular account and charges change.
BSDA joint holding: Joint BSDA: up to 2 holders; every holder must meet the conditions, so the BSDA must be each holder's only demat account across depositories; No joint holder may have another demat account in his or her own name. It is not enough for only the first holder to meet the conditions.
NRI account types: Repatriable: proceeds can go abroad | Non-repatriable: proceeds credited to NRI rupee account in India; The nature depends on how the investment is made and the bank account used.
Account opening documents: KYC + account opening form + DP-BO agreement + tariff sheet; The BO must be given a copy. Charges are set by the DP in its tariff sheet, subject to the regulations and the depository's rules.

How to solve Types of Demat Accounts and Account Opening questions

Use the same short routine for any question on account types or opening.

1Identify who the holder is: resident individual, joint holders, minor, corporate, NRI or FPI.
2Identify the account type asked for: regular, BSDA, repatriable or non-repatriable.
3If BSDA is mentioned, check eligibility: an individual (sole or joint holder), only one demat account in total, and the holding limit.
4For NRI cases, ask whether proceeds can go abroad. Yes means repatriable; no means non-repatriable.
5For opening questions, recall the order: KYC, account opening form, DP-BO agreement, verification, account activation.
6Match the document to the purpose: identity, address, PAN, signature, bank details.
7Remove options with absolute words such as 'never' or 'any person' unless the rule really is absolute.
8Pick the option that matches the regulation, not common practice.

Quickest way: Four-question filter

When to use it: Use this when you have under a minute per MCQ and the options look similar.

Who is the holder? BSDA is for individuals (sole or joint holders) who meet the single-demat-account and value-limit conditions.
Where do the sale proceeds go? Abroad means repatriable.
Which document is it? Match to identity, address or PAN.
What does the DP-BO agreement do? It sets rights and duties of the DP and BO, not trading terms.

Common mistakes in Types of Demat Accounts and Account Opening

Thinking a company or HUF can open a BSDA.
Students remember BSDA as 'low cost for small investors' and ignore who qualifies.
Fix: Remember BSDA is for individuals (sole or joint holders, up to 2) where each holder has only one demat account in total, which is the BSDA, and who stay within the value limit.
Confusing the beneficial owner with the registered owner.
Both words sound like ownership.
Fix: The depository is the registered owner in the issuer's records. The investor is the beneficial owner.
Treating PAN as optional.
Some students recall that certain categories are exempt and over-generalise.
Fix: PAN is the rule. Exemptions are limited to specific cases, so pick the option that requires PAN.
Mixing repatriable and non-repatriable accounts.
Both terms are used for NRIs and look alike.
Fix: Repatriable means proceeds can be sent abroad. Non-repatriable means they stay in India in a rupee account.
Assuming the DP can change the DP-BO agreement terms.
Students think DPs set their own contracts.
Fix: The agreement follows the regulations. A DP cannot add terms against them, though it can set its own tariff within rules.
Forgetting that the investor gets copies of signed documents.
The process is learnt only as the DP's checklist.
Fix: Remember the BO is entitled to a copy of the signed forms and agreement.

Worked examples

Example 1

Which of the following is true about a basic services demat account (BSDA)? (a) It can be opened by a company (b) Each holder must have only one demat account across depositories, and that account is the BSDA (c) It has no limit on holdings (d) It is meant only for NRIs

Show the solution

Test option (a): BSDA is for individuals, so a company is not eligible. Reject.
Test option (b): the condition is that each holder, whether sole or joint, has only one demat account in total across depositories, and that account is the BSDA. This matches.
Test option (c): BSDA has a cap on the value of securities held. Reject.
Test option (d): BSDA is for small resident individual investors, not only NRIs. Reject.

Answer: (b) Each holder must have only one demat account across depositories, and that account is the BSDA.

Example 2

An NRI sells shares held in his repatriable demat account. Where can the sale proceeds be sent? (a) Only to a resident's account (b) To his NRI account in India only (c) Abroad, as the account is repatriable (d) To the depository

Show the solution

A repatriable account allows proceeds to be remitted outside India.
Option (a) is wrong as proceeds do not go to a resident.
Option (b) describes a non-repatriable account. Reject.
Option (d) is wrong because sale proceeds are settled through the clearing system and bank accounts, not credited to the depository.

Answer: (c) Abroad, as the account is repatriable.

Exam tips

Learn the BSDA conditions as a short list: individual, one account, holding limit, lower charges.
Check the current BSDA limit and charges in the latest workbook before the exam, as SEBI revises them.
For NRI questions, find the word 'proceeds' and decide where the money goes.
A wrong answer costs 25% of the marks assigned to the question. Guessing has positive expected value once your chance of being right is above 20%, so removing even one option helps. Skip only when you have no idea.
Watch for absolute words such as 'only', 'never' and 'any'. They often mark the wrong option.

Practice questions from Functions of Depository Participant - Account Operations

Types of Demat Accounts and Account Opening: frequently asked questions

What is a basic services demat account (BSDA)?

It is a low-cost demat account for small individual investors. It has lower charges but a cap on the value of securities held. The individual must have only one demat account in total across depositories, and that account is the BSDA.

What documents are needed to open a demat account?

You need KYC documents: proof of identity, proof of address and PAN, along with a completed account opening form and signed DP-BO agreement. Bank details and a photograph are also usually collected.

What is the difference between repatriable and non-repatriable demat accounts?

Both are for NRIs. In a repatriable account, sale proceeds can be sent abroad. In a non-repatriable account, proceeds are credited to an NRI rupee account in India.

What is the DP-BO agreement?

It is the agreement between the depository participant and the beneficial owner. It sets out their rights and duties, and the DP cannot add terms that conflict with the regulations.