Why You should Have A Demat Account?

Why You should Have A Demat Account?

by Nutan Gupta Last Updated: Dec 11, 2022 - 03:57 pm 223.7k Views
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As Indians, we can proudly say that banks have successfully penetrated 99% of households in all of India. Banks are making sure that they provide essential services in each corner of the country. So, most of us now know how bank functions and what services they provide. Let’s go further and try to understand what a demat account is.

Simply put, a demat account is like a bank account. A bank account holds money of the account holder and a demat account holds securities. These securities can be in the form of shares of a company, bonds, exchange-traded funds or mutual funds. Demat account enables the holder to store shares in an electronic form. Investors hold shares and securities in a dematerialized (demat) account instead of physical certificates.

If you want to invest in stocks, it is necessary for you to have a demat account. It is opened with Depository Participants (DP). Depository Participants are those organizations that enable contact between investors and depositories. There are two depositories registered with SEBI – NSDL (National Securities Depository Limited) and CDSL (Central Depository Services Limited). Demat account is the account that you hold with a Depository Participant.

Depository Participant is a broker who spells out the requirements, terms, fees, etc. to maintain a demat account with them. An investor would comply with all the requirements and open an account with the DP.

Here are the steps enumerated to open a demat account:

  • Approach a Depository Participant
  • Fill the required forms and submit the documents
  • On successful completion of this process, account number is generated
  • Access the demat account

Check: Procedure to Open a Demat account and necessary document required to open a Deamt account

It is mandatory now to link your Aadhar UID with the demat account. Also, it is compulsory to fulfill the KYC norms too. Primary documents are required to get this done. Once this process is over, you will be able to buy and sell shares online. Just like a bank account, you can have multiple demat accounts with various depository participants.

Demat account thus enables an investor to trade online. Buying and selling happen through online stock trading platforms; these platforms are provided by DP to the investors. Through these trading platforms, an investor can place an order to either buy or sell in the stock market. Once the order is placed, the money is debited, and the demat account is credited with the shares of the company.

What are you waiting for? Invest in the share bazaar, open demat account today!

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