A DEMAT account is an account used by investors to store the shares and securities they own in an electronic format. This also applies to a dematerialised account. DEMAT accounts in India are maintained by Depository Participants (DP), which in India includes:
- National Securities Depository Limited (NSDL) and
- Central Depository Services Limited (CDSL).
It also helps an individual keep proper track of investments made in shares, exchange-traded funds, bonds, and mutual funds in an organised manner. A DEMAT account makes storing and holding these investments easy, as they are kept together in one single place.
Why is a DEMAT Account Important?
It serves as a digital platform that holds the shares of the individual with utmost security. And would also help one avoid theft, forgery, loss, and any damage that will be made to shares as they would be stored in digital form rather than in physical certificate form. This will also facilitate quick, easy, and seamless transactions.
What is Dematerialisation?
It is nothing but the process of converting the physical share certificates into electronic forms, which can be maintained easily and accessed from anywhere around the world. In the past, shares were held in the form of physical certificates, and this made the storing and transfer of the same difficult, and this marked the advent of DEMAT account, which made it easier to handle the shares or the investments made. So, an investor who wants to convert his physical shares into a digital form shall open a DEMAT account with any of the DPs available currently in the market.
Different types of DEMAT Account
There are three major types of DEMAT Account, and these include:
- A regular Demat account, which Indian citizens use to hold shares purchased online.
- Repatriable DEMAT Account, which is held by Non-Resident Indians (NRIs), who can also transfer the fund overseas, and this account should be associated with their NRE (Non-Resident External) Account.
- Non-Repatriable DEMAT Account, which is also held by the NRIs, but this cannot be transferred by them to an overseas account.
Benefits of owning a DEMAT Account
- DEMAT Account will eliminate the risk of paper-based share certificates as with the DEMAT Account, the investors are now converting their physical share certificates into digital form. This is because, in case of an investor who might be holding shares in multiple companies will have a dozen of certificates and will have to get a safe for keeping this. But still, it will be open to theft, tampering, loss and also forgery. It also required lengthy paperwork when the shares are to be transferred, as it would otherwise be prone to errors. And with the DEMAT Account, all these shares can now be stored digitally and also transferred digitally with a secure digital repository.
- DEMAT Account facilitates a convenient storage and transfer of shares as it allows you to store any number of shares, and this enables you to trade in volumes as an investor or trader. It also facilitates the monitoring of all the shares that are held by you in the DEMAT Account, along with a swift transfer of shares while trading online.
iii. It facilitates the facility of nomination as per the process described by the repository, and in case of the demise of the investor, the shares in a DEMAT Account shall get transferred to such nominee, whom the account holder appointed.
- An easy online access shall be enabled, as you can access the same anywhere, anytime using a laptop or smartphone.
- It also facilitates the storing of multiple kinds of investments like shares, bonds, mutual funds, government securities, exchanges traded funds and such other types of investments.
- DEMAT Account also get bonuses and stock splits updated automatically, when the company in which you have invested or hold shares makes a decision regarding the same.
How to Open a DEMAT Account
For opening a DEMAT Account, you have to follow the below-stipulated steps:
- Reach out to a stockbroker available in the market and open the account opening form supplied by them, either online or offline.
- Enter all necessary details as required by the form, like name, address, email ID, mobile number, PAN details and such other details as asked on the same.
- Add your bank account details.
- Upload the necessary KYC documents as required by the stockbroker along with address and identity proof.
- Comply with such other additional requirements as may be emphasised by the stockbroking company’s policies.
- E-sign the form through OTP verification using your phone number, which is linked with Aadhaar.
- Once the aforementioned steps have been completed, a confirmation email along with the login credentials will be sent by the stockbroking company you have signed up with.
How to use a DEMAT Account
Using a DEMAT Account is as simple as this, as it will be linked with your regular bank account. For starting trading using the DEMAT Account, you should first transfer funds from your bank account to such a trading account. Once this has been done, you can place orders to buy new shares.
Once this purchase has been done, the shares will get transferred to your DEMAT account by the end of T+2 days, where T denotes the day on which such order was executed. And for selling a share in your DEMAT Account, you can place a sell order in the stock exchange using the Trading Account itself.
In the world of technological advancement and growth, it is important that we all try to invest in shares and earn from the same. So, for making this possible, it is important that we understand what a DEMAT Account is and how it can be used for achieving our investment dreams.
