What is a Demat Account?
After buying a company’s stock you held a physical certificate, In the past. The process of Account opening, as well as buying and selling of shares, were too lengthy. But, today’s world is a digital era.
In this era, you need not go bank with physical money to transfer anyone you need. You can transfer it through net banking or different apps at your home. Such transform occurred electronically rather than physically.
An account used to hold shares and securities in electronic format is called a Demat Account. What we say the “Demat Account” is the shortest form of Dematerialised account. So, what we call Demat Account is actually the Dematerialised Account.
The key purpose of the Demat account is to hold shares that have been bought are dematerialized. That shares are converted from physical form to electronic form. Which makes trading in shares easy for the users during online trading.
In India, NSDL and CDSL are the two depositories, who provide Free Demat account services. Many depository participants or stockbrokers are there who Intermediaries between Depository and Account Holders.
Few Brokers in India to facilitates these services are Sharekhan, Zerodha, Upstox, Angel Broking, 5 Paisa, etc. Each intermediary has some Demat account charges. In keeping the view to the type of subscription, volume held in the account, and terms and conditions between a depository and a stockbroker those charges vary from Brocker to Broker.
Key features of a Demat-Account?
Following are some of the benefits of the Demat account and its uses
1 Easy to open:
The process of opening a Dematerialised Account is very easy. You need not go anywhere to open this account. No paperwork also need for it. You can easily open an account at any broker of your choice from your home by logging in to their website. Just a smartphone or a Laptop is enough with your Bank account details, PAN Card, and Identity proofs.
Many kinds of unexpected expenses need to spend the investors when transacting with physical share certificates like handling cost, stamp duty, and so on.
It can be eliminated the costs of holding shares in the form of physical share certificates through your Demat account. You can also get the status of the instant amount of your transaction.
In past, transactions of shares used to happen through certificates or physical receipts. Such practices used to incur a lot of paperwork. So the process of trading activities held to get slow down.
without presenting their certificates, nobody was able to do any transaction. Today the Dematerialised Account holds shares and securities in electronic form. which makes it too easy to transact instantly very fast and smoothly.
Physical damage, misplacement, loss, or forgery were the challenged threats that always remained in that trading by physical securities. Now a day this Dematerialised Account eliminates all such risks and gives you peace of mind.
The process of delivering physical certificates is too lengthy and used to take days even weeks and Sometimes that needed to be fulfilled due to the administrative system. But Today, With the help of the Demat account, you are avoiding the waiting period as it offers instant transactions.
6. Multiple access points
This account is purely operated electronically. So users can access the account from multiple touchpoints like mobile, tablet, PC, laptop, etc.
Here’s another benefit of the Demat account given by some banks like Kotak Securities.
Kotak Securities offers a 3-in-1 account, where trade can get more seamless since his/her bank and trading accounts are linked with the Demat account! Know more here.
The assets that you can hold in the Dematerialised account
You can also hold equity shares and mutual funds, gold ETFs, index ETFs, RBI gold bonds, institutional bonds, closed-ended funds, etc in your Demat account. Apart from holding you can trade in equity, equity derivatives (future and option) commodity, and currency pairs.
Types of Demat account
Three types of Demat Accounts are there. They are 1) Regular Demat Account 2) Repatriable Dematerialised account, and 3) Non-repatriable Dematerialised account.
1. Regular Dematerialised Account:
A regular Dematerialised account is meant for investors who reside within India. The account is ideal for those who deal with only equity shares. The bought shares are stored in a digital format in that account. When the shares are sold, they are taken from it.
If you plan to trade in futures and options then you need not hold a regular Dematerialised account. Because futures and options come with an expiry date. So, they don’t need to be stored.
SEBI introduced a new type of Dematerialised account recently. That is called the Basic Services Demat Account (BSDA).
This is similar to a regular Dematerialised account. But it has a facility of no maintenance charges if the holding is within Rs 50,000. And For holdings between Rs 50,000 and Rs 2 lakh, the charges are Rs 100 per annum.
The idea behind the BSDA lunching was financial inclusion and aiding investors, who are yet to open a Dematerialised account but wish to participate in the markets.
2. Repatriable Dematerialised account:
This type of Dematerialised account is meant for NRIs (non-resident Indians). It allows the wealth to transfer abroad. However, this kind of Demat account requires an NRE (Non-Resident External) bank account.
3. Non-repatriable Demat account:
This type of Demat account is again for the Non-resident Indians (NRIs). However, The funds cannot be transferred abroad. Also, You must have an NRO bank account linked to the Demat account.
Demat Account Charges
Click here to know the charges of a Demat account.