Demat account also works in the same way as our bank account works, just as currency is not physically kept in your bank account, but only the entry of your money is written. Similarly, the accounting of shares in the demat account is done. In this way, the demat account keeps the account of the transactions related to your mutual funds, bonds and shares with you. Whenever you sell it, it gets deducted accordingly. The amount received after the sale of the shares comes in your savings account.
A demat account helps investors to hold shares and securities in a digital or electronic format. The full form of Demat account is “Dematerialized Account”. Demat accounts in our country are maintained by 2 Depository Participants (DPs) National Securities Depository Limited and Central Depository Services Limited.
Benefits Of A Good Demat Account
- Eliminates the risk of paper based share certificates. Before the introduction of demat, company shares existed in the form of physical papers or certificates. If you owned shares of a company, you used to have to keep a dozen paper certificates safe. Here there were possibilities of tampering, theft, loss and forgery in these documents. Besides, transfer of shares involved lengthy paperwork. With our Demat account, we can store all these shares electronically.
- Convenient share storage and transfer- It allows you to store any number of shares, so that you can trade in volume and monitor the details of all the shares held by you in the demat account. It facilitates faster transfer of shares while trading online.
- Bonus Stock – Splits are updated automatically. If any initiative of the company whose shares you hold brings changes in its shares such as bonus issue, ustock split, etc., it will automatically get updated in your demat account.
- Stores various investments – Apart from shares, a demat account can also hold a number of assets, such as bonds, mutual funds, exchange traded funds, government securities, etc.
- Easy access through online medium You can access your demat account anytime, anywhere through your smartphone or laptop or computer.
- A demat account also provides the facility of nomination as per the procedure prescribed by the depository. In case of death of the investor, the nominee appointed will receive the shareholding in the demat account.
Types Of Demat Account
While we opening a Demat account, the investors has to choose a Demat account that is relevant of our profile. This is the most common type is a regular Demat account. Any other Indian investor or Indian Investor can open a Standard Demat account in no time with the online demat account open process. A part from a standard demat account there are two other types of re patriable demat account and patriable demat account. The repatriable fund are deposited in a separate bank account known as Non-resident Demat Account. Repatriable funds are those funds which that can be transferred abroad.
Regular Demat Account
Regular Demat Account is meant for resident Indian investors who wish to trade in individual shares and require custody of securities. Your demat account gets debited when you sell and gets credited when you buy during trading. If you are trading in F&O, you do not need a demat account as these contracts do not require warehousing.
Basic Services Demat Account
This is a new types of demat account that introduced by SEBI. There is no change in maintenance in these accounts if the holding value is less than Rs.1,000. Between Rs.,000 to Rs.2 lakh, the change is Rs.100. The new account type targets new investors who have not yet opened a demat account.
Repatriable Demat Account
NRI investors open a repatriation account to transfer their earnings from the Indian market overseas. If you wish to open a repatriation account, you will need to close your regular demat account in India and open a Non-Resident External account to receive payments.
This account is also open to NRIs, but it does not allow transfer of funds to overseas locations. SEBI has made it for mandatory all investors to have a demat account. If you do not have Demat then you cannot trade in Indian Stock Exchange. Update yourself about account opening process, charges.