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

KYC, PAN and Documentary Requirements for Demat Account Opening

Updated 11 October 2026 · Fact-checked

KYC is the identity and address check a Depository Participant must complete before opening a demat account. You need a PAN (with limited exceptions), proof of identity and address, and in-person verification. KRA stores KYC records so they can be reused across intermediaries. e-KYC allows paperless verification using Aadhaar-based authentication.

Understand KYC, PAN and Documentary Requirements

A demat account holds securities in electronic form. Before the Depository Participant (DP) opens one, it must know who the client is. This is called KYC (Know Your Client). It helps prevent fraud, money laundering and misuse of accounts.

KYC has three building blocks. First, PAN, which links the client to the tax system and is the main identifier in securities markets. Second, proof of identity (POI) and proof of address (POA), supported by documents. Third, in-person verification (IPV), where the DP's staff verify the client against the original documents and the client's photograph.

The DP must compare copies of documents with the originals, or accept them in the form permitted by the rules (for example, electronically signed or digitally verified documents). The DP records who did the verification, with the date, name and signature or authentication of the official.

To avoid repeating KYC at every intermediary, SEBI introduced KYC Registration Agencies (KRAs). Once a client's KYC is done with one registered intermediary, the record is uploaded to a KRA. Other intermediaries can fetch it, so the client need not redo the whole process. CKYC (Central KYC Registry) is a separate central repository, set up under the PMLA framework, that holds KYC records across the financial sector (banking, insurance, securities) and assigns a unique KYC identification number. The simple difference: KRA serves the securities market; CKYC serves the whole financial sector.

e-KYC is paperless KYC. The client authenticates using Aadhaar, and the DP receives the verified details electronically. It reduces paperwork, but the exam focus is that the DP stays responsible for the completeness and correctness of the KYC.

For your exam, remember that the DP is responsible for KYC. Account opening cannot be completed unless the required documents are in order. Questions test the mandatory nature of PAN, the exceptions, who does IPV, and the role of KRA.

Key formulas to remember

PAN rule: Demat account opening → PAN is mandatory for every holder (including each joint holder); Limited exemptions exist, such as the Sikkim resident exemption and certain government and institutional categories. Learn the list in your workbook.
Core KYC elements: KYC = PAN + POI + POA + IPV + photograph + completed account opening form; All must be in order before the account is activated.
Verification of documents: Copy of document must be verified with the original (or valid electronic equivalent); The verifying official records name, date and signature or authentication.
KRA vs CKYC: KRA = KYC records for securities market intermediaries; CKYC = central records across the financial sector; Do not treat them as the same system.
e-KYC: Aadhaar-based authentication → paperless verification of identity and address; The DP remains responsible for the KYC.

How to solve KYC, PAN and Documentary Requirements questions

Use this method for any question on KYC, PAN and documents in demat account opening.

1Identify what is asked: PAN, POI/POA, IPV, KRA, CKYC or e-KYC.
2Check the client type: individual, joint, minor, corporate, NRI or exempt category.
3Apply the PAN rule first. PAN is mandatory for every holder, unless the question names a specific exemption.
4Check document requirements: identity, address, photograph and form, each with verification against originals.
5For IPV, ask who must do it and what is recorded. The DP's own staff verify, and the official records name, date and signature.
6For KRA and CKYC, decide which system the question describes. Securities market only means KRA; across the financial sector means CKYC.
7Eliminate options that say a DP may skip a step because a document is 'commonly known' or the client is known personally.
8Choose the option that keeps the DP responsible and the process complete.

Quickest way: Four-word check: PAN, POI, POA, IPV

When to use it: Use when you have under a minute on a KYC question and the options look similar.

Ask: is PAN involved? Default answer is that it is mandatory for each holder.
Ask: are identity and address both covered? One alone is not enough.
Ask: was the document verified against the original and by whom?
Ask: is a KRA or CKYC being used correctly? Reject options that swap their roles.
Reject any option that lets the DP delegate its KYC responsibility away entirely.

Common mistakes in KYC, PAN and Documentary Requirements

Thinking PAN is needed only for the first holder of a joint account.
Students think the first holder represents the account.
Fix: Remember that PAN is required for every holder, including joint holders.
Treating KRA and CKYC as the same thing.
Both are KYC repositories, so they sound alike.
Fix: Link KRA with securities market intermediaries and CKYC with the whole financial sector.
Believing e-KYC removes the DP's responsibility.
Paperless sounds like automatic.
Fix: The DP is still accountable for the correctness and completeness of the client's KYC.
Assuming IPV can be skipped for a known client or when documents are posted.
Students think a personal relationship replaces verification.
Fix: Verification is a requirement. Apart from the permitted electronic route, it cannot be waived because the client is known.
Accepting only identity proof and ignoring address proof.
Students treat one document as enough for both.
Fix: Check that POI and POA are both covered. One document can serve both only if it validly contains both.
Memorising PAN exceptions loosely and applying them to all categories.
Exemptions are narrow and easy to over-generalise.
Fix: Apply an exemption only when the question names that exact category.

Worked examples

Example 1

A demat account is to be opened in joint names of two individuals. Which statement is correct? (A) PAN is needed only for the first holder (B) PAN is needed for each holder, unless an exemption applies to that holder (C) PAN is needed only if the account will trade in F&O (D) PAN is optional if the client has an Aadhaar number

Show the solution

Identify the topic: mandatory PAN for joint accounts.
Recall the rule: PAN is required for every holder.
Test A: it limits PAN to one holder, so it is wrong.
Test C: PAN is not tied to F&O trading, so it is wrong.
Test D: Aadhaar does not replace PAN, so it is wrong.
Test B: matches the rule and allows for named exemptions.

Answer: (B) PAN is needed for each holder, unless an exemption applies to that holder.

Example 2

Which statement best describes the KRA? (A) A central registry across banking, insurance and securities (B) A registered agency that holds KYC records of clients of securities market intermediaries (C) A depository that holds securities in electronic form (D) A process of verifying clients in person

Show the solution

Recall the purpose: avoid repeating KYC across market intermediaries.
Test A: this describes CKYC, so it is wrong.
Test C: this describes a depository, so it is wrong.
Test D: this describes IPV, so it is wrong.
Test B: matches the KRA role.

Answer: (B) A registered agency that holds KYC records of clients of securities market intermediaries.

Exam tips

Whenever the question says every holder or each holder, think PAN.
Match the system to its scope: KRA for securities market, CKYC for the whole financial sector.
Read exemption questions carefully and pick only the category named in the option.
Watch for options that shift DP responsibility to the client, the KRA or the broker. These are usually wrong.
Learn the exact exemption list and document lists from your workbook; the exam tests precise wording.

Practice questions from Functions of Depository Participant - Account Opening

KYC, PAN and Documentary Requirements: frequently asked questions

Is PAN mandatory for opening a demat account?

Yes, as a rule PAN is required for every account holder, including each joint holder. Only limited exempt categories are allowed, so learn the list in your NISM workbook.

What is the difference between KRA and CKYC?

A KRA holds KYC records for securities market intermediaries. CKYC is a central registry covering the wider financial sector and assigns a unique KYC identification number.

Is in-person verification required for a demat account?

Yes, the DP must carry out verification of the client against original documents. The official records their name, date and signature or authentication. Permitted electronic routes such as e-KYC can serve this purpose where the rules allow.

Which documents are needed for KYC at a DP?

You need PAN, proof of identity, proof of address, a photograph and a completed account opening form. Copies must be verified against originals or accepted in a valid electronic form.