What Is A Demat Account?
Demat accounts, also mentioned as dematerialized accounts, were first introduced in India in 1996, and thus the Indian stock market has never looked back since. Following the introduction of demat accounts, our country has seen a gentle increase within the number of companies listed and investors participating available exchanges like the BSE and NSE.
A Demat account is similar to that of a bank account. The only difference is that Demat holds securities, which might be in the form of shares, bonds, or debentures, instead of physical certificates.
As an investor, one must open a Demat account with a Depository Participant in order to purchase and sell securities on the Indian stock market (DP).
The Advantages Of Having A Demat Account
- Your shares and securities are safely stored;
- Transaction costs are much lower than in the physical segment since stamp duty is not required.
- Fast and convenient for electronic settlements
- Less paperwork in the event of a securities transfer
- Risks connected with physical certificates, such as theft, non-delivery, and fraudulent certificates, are eliminated.
- Sell any number of shares you want—even one.
Types Of Demat Account
In India, there are three types of demat accounts available.
- For investors based in India, a standard demat account.
- Non-resident Indians can have a repatriable demat account (NRIs). Funds can be sent internationally using this demat account, but it must be linked to an NRE bank account.
- The non-repatriable demat account is the third type of demat account. NRIs utilise it as well, although they are unable to move funds abroad using this demat account. An NRO bank account must be linked to this type of demat account.
What To Keep In Mind Before Opening An Account?
Before you open a demat account with a broker, be sure to look into the following:
- Whether you’re working with a cheap broker or a full-service brokerage business
- Brokerage costs, annual maintenance fees, transaction fees, and other demat account fees.
- Broker credentials – whether the broker or the DP is registered with SEBI.
- Look into any pending cases or complaints against the broker or brokerage firm.
- See if demat and trading account offer value-added services like research, insights, and analytics.
How To Select a Demat Partner
A reputable service brokerage firm is great if you are seeking for a seamless and secure approach to deal in shares.
Finding the appropriate broking firm takes some research and planning for first-time investors.
Essential Questions to Research on:
Looking for the answers to above questions? Unable to find the right broker fitting all the above requirements?
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Opening A Demat Account Online
- Fill out and submit the account opening form provided by your brokerage firm, together with your KYC information (date of birth, PAN card, email address, and bank account).
- A DP-Investor agreement will be included in the DP’s KYC form. This document lays out the rules and regulations, as well as investor rights and responsibilities. You must read the tiny print carefully.
- The company will usually email you an OTP to your registered phone number. Your Demat account information is delivered to your registered email address.
- Many companies will request in-person verification (IVP), which may be accomplished by visiting a branch or having a DP representative come to your location.
- Once your documents have been confirmed, you will be given a demat number.
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How A Demat Account Works
- It is impossible to participate in the financial markets without a demat account.
- A demat account is just a location to store or maintain electronic or dematerialized shares or securities and does not hold any cash.
- When you sell securities such as shares or derivatives and get money in lieu of the sale, the question of moving money from the demat account to the bank account arises. In most cases, brokerages provide demat and trading account in one package.
- The proceeds of the sale are sent to the associated trading account automatically. Money can be readily transferred from the trading account to the registered bank account once it has been deposited.
- Having a Demat Account is of paramount importance if you want to hold shares or securities, and start trading in stock markets. All you need to do is open a Demat Account with a trusted partner and stay ahead in the journey of stock trading.