Demat Account

A stock market is a place where shares of public listed companies are bought or sold. It involves issuing, buying, and selling equities that trade on stock exchanges. The conversion of these physical shares into digital form is called Dematerialisation. Previously, shares were maintained as tangible certificates, which were difficult to preserve and transfer. The introduction of the Demat account made it much easier to manage stocks. A registered depository stockbroker is required to open a Demat account for investors who wish to change their physical shares into electronic form. 

Definition Of Demat Account

A Demat Account, also known as a Dematerialised Account, allows you to hold shares and assets in an electronic form.

Converting physical investment documents into digital records is known as “Dematerialisation.” Investors must fill out a Demat request form and submit it, including physical certificates, to dematerialise physical securities. This form is accessible from the depository participant. An ISIN or International Securities Identification Number is assigned to each security. For each identification number, a new request form should be submitted.

Types Of Demat Account

There are three kinds of Demat accounts that can be created in India based on the residential status of an individual. 

• Regular Demat Account: Every investor in India has access to a regular Demat account. You can open this Demat account with the depository participant (DP) you prefer. This type of Demat account differs from the others as it does not include additional features such as foreign fund transfers.
• Non-repatriable Demat account: This sort of Demat account can be opened by non-resident Indians who already have a non-resident ordinary rupee or NRO account. This, however, does not permit international fund transfer.
• Repatriable Demat account: This sort of Demat account is available to NRIs with a non-resident rupee or NRE account. This account enables international money transfers.

Advantages Of A Demat Account

• Nomination facility: A Demat account offers a nomination facility according to the depository’s procedures. In the event of the investor’s passing, the shareholding in the Demat account will be transferred to the nominee.
• Easy share transfer and storage: A Demat account helps store an unlimited number of shares, allowing you to trade in large volumes and keep track of the shares you own. It also makes it easier to transfer shares quickly while dealing online.
• No risk of forgery and theft: Shares were only available as actual paper certificates before the introduction of the Demat account. If you owned stock in a corporation, you had to keep a dozen paper certificates in your safe. Forgery, theft, tampering, and loss were all possibilities. Furthermore, shares transfers included extensive documentation, which was prone to mistakes and delays. However, you can keep shares electronically in secure and safe digital repositories with a Demat account. 
• No stamp duty cost: The elimination of stamp duty fees formerly linked with tangible records of securities resulted in a significant reduction in trading costs.
• Time-saving process: Using a Demat account to buy and sell shares is a quick and hassle-free process. It would, of course, take a long time if tangible certificates were involved. However, using a Demat account allows for seamless and low-cost transactions. This is since securities are held in a dematerialised format.

How To Open A Demat Account

You may be wondering how to open Demat accounts now that you understand its purpose and benefits. A Demat account can be either created online or offline. You must fill out an online account application, which is entirely paperless and requires 15 minutes or less to complete. Now, let’s discuss how to open a Demat account offline. 

Choosing a Depository Participant (DP)

You can choose the most appropriate DP for your requirements after comparing the benefits and services given by various Depository Participants.

Complete the application form

To open a new Demat account, you’ll require filling out an application form. Along with this, you’ll need to produce a KYC documents list, including address proof, PAN card, identity proof, bank account information, and your personal information.

The Method of Verification

You will be provided with a list of regulations to guarantee legal and ethical trading, as well as to answer any questions you may have about owning a Demat account. The DP will verify your identity and the KYC documents in person. You must pay any fees related to the creation of a Demat account. The fee is determined by the DP’s current policy. The charge varies from one DP to the next.

Final permission

The new Demat account is created after the final formalities have been fulfilled and your documents have been confirmed. Your account’s Unique Identification Number will also be issued to you.

Conclusion

A Demat Account functions similarly to a bank account where you can keep your shares and other securities in an electronic format. Anyone who is a registered Indian resident and has the proper papers can create a Demat account. Even non-resident Indians can maintain a Demat account, subject to specific SEBI regulations. There can be a maximum of three account holders in a Demat account: one primary account holder and two joint account holders. The above article discusses what is Demat account in detail.