Demat Account has become somewhat of a necessity if you are considering investing in stock markets. It helps in securing the process of share trading and also makes it fast.
Let us look into what is demat account.
If you’re investing in equity shares in physical form, you will generally find it to be a lengthy procedure. Moreover, it involves a lot of paperwork and there is also the risk of fake shares. So, to make the whole experience a lot easier, it would do you well to have a demat account. While doing online trading, a demat account will be used to hold shares and securities in an electronic (dematerialized) format. Here, the share certificates will be converted into an electronic form from a physical form, which makes it easier to access.
With a Demat Account number, you can manage trades electronically. Using a Demat account, you can buy and store your shares securely. It works the same way as a bank account does, where the deposits and withdrawals are maintained in a passbook. So, every time that you buy or sell shares, it will be credited to or debited from your Demat account.Demat accounts can be used to hold a variety of investments like mutual funds, equity shares, bonds, exchange traded funds and government securities. You do not need to have any shares to open a Demat account. It is completely okay to have zero balance in your account.
Facilities offered by a Demat account
- A Demat account can be used for transferring share holdings of investors. This can be done using a DIS (Delivery Instruction Slip) to conduct share trading.
- The securities in your Demat Account give you access to so many loans. You can pledge your securities as a collateral to get a loan from the bank.
- With a Demat account, it is very easy to convert your securities into different forms. You only have to give the necessary instructions to your depository participant. Since the securities are in a dematerialized form, you can easily convert it into a physical form according to your requirement.
- Since it is digital, you can conduct operations like trading, investing, monitoring etc., using the internet on various media like the computer, smartphone or other devices.
- With a Demat Account, you can avail benefits which come with owning securities. Corporate actions that are related to equity shares like right shares, stock split, etc., are updated in the Demat Accounts.
- When you have a Demat account, you have the facility to freeze it for a duration as per your requirement. You can do this to prevent any unwelcome debit or credit to your Demat account. However, to freeze your account, you will need to have a certain quantity of securities in your account, unlike opening of the account, where no shares were required.
- NSDL (National Securites Depository Limited) keeps adding on facilities for the Demat Account holders. Instead of submitting slips physically, account holders can send slips electronically to the DP (Depository Participant). This can make the process faster and also less tiring.