Demat Account
A Demat Account or Dematerialized Account provides the facility of holding shares and securities in an electronic format. During online trading, shares are bought and held in a Demat Account, thus, facilitating easy trade for the users. A Demat Account holds all the investments an individual makes in shares, government securities, exchange-traded funds, bonds and mutual funds in one place.
Importance of Demat account
Demat account has made it easier to handle stocks. The Indian exchanges now follow the settlement cycle of T+2 days facilitated by the Demat account. You pay the seller on the second business day when you buy shares following the settlement cycle, and your Demat account gets automatically credited with the purchased securities. Demat account has made the process of security trading seamless and hassle-free.
Benefits of Demat account
Benefits of Demat account
- Seamless and fast transfer of shares
- Facilitates digitally secured storing of securities
- Eliminates theft, forgery, loss and damage of security certificates
- Easy tracking of trading activities
- All-time access
- Allows to add beneficiaries
- Automatic credit of bonus stocks, rights issues, split shares
How does a Demat Account work?
How does a Demat Account work?
Trading through a Demat account is similar to the procedure of physical trading, except that a Demat account is electronic. You begin trading by placing an order through your online trading account. For this purpose, it is necessary to link both trading and Demat accounts. Once an order is placed, the exchange will process the order. Demat account details the market price of shares and the availability of shares is verified before the final processing of the order. On completion of the processing, shares are then reflected in your statement of holdings. When a shareholder wishes to sell shares, a delivery instruction note has to be provided with details of the stock. Shares are then debited from the account and the equivalent cash value is credited to the trading account.
Types of Demat account
Regular Demat account: Regular Demat account is for resident Indian investors who want to trade in shares alone and need a storing for securities. The stocks get debited from your Demat account when you sell and credited when you purchase during trading. If you are trading in F&O, you don't need a Demat account because these contracts don't need storage.
Basic Services Demat Account: It is a new type of Demat account introduced by the SEBI. These accounts don't have maintenance changes if the holding value is less than Rs 50,000. Between Rs 50,000 and 2 lakh, the changes are Rs 100. The new type of account targets new investors who are yet to open a Demat account.
Repatriable Demat Account: Non-resident Indian investors open a repatriable account to transfer their earnings from the Indian market abroad. If you want to open a repatriable account, you'll have to close your regular Demat account in India and open a non-resident external account to receive payments.
Non-repatriable account: This account is also for non-resident Indians, but it doesn't allow fund transfer to foreign locations.
SEBI has made it mandatory for investors to have a Demat account. You can't trade in the Indian stock exchange if you don't have a Demat. Update yourself on the account opening process, charges, and select a trusted depository participant.