What Is Demat Account? Meaning, Benefits & More!

We have all heard of bank savings accounts. It provides simple access to our cash while protecting them from theft and mismanagement. A Demat account serves the same purpose for investors. Nowadays, a Demat account is required for stock investing.

A Demat Account is basically a form of account that is widely used to store shares and assets in an electronic form. A Demat account is actually an abbreviation for a dematerialized account. The sole purpose of creating a Demat account is to keep your shares that have been purchased or dematerialized to be easily tradable online. Dematerialized means converting it from physical to electronic shares.

Depositories in India, namely the NSDL and CDSL have been offering free Demat account services. These services are taken forward by various intermediaries, other depository participants, or even stockbrokers.

Demat account prices vary depending on the amount that is maintained in one’s account, what kind of subscription they take, the legal terms and conditions with respect to their account, and between the stockbroker and the depositor.

So, what is meant by a Demat account?

A Demat Account, as said above, is also known as Dematerialised Account, which allows you to keep your shares and assets in a secured electronic format. The shares which are bought and kept in Demat account while trading online makes it very easy for consumers when trading.

It also consolidates an individual's interests in different stocks, bonds, securities, even the exchange-traded funds [ETFs] apart from the mutual funds.
 

Demat facilitated the digitalization of the Indian stock trading industry and compelled SEBI to improve oversight.

Furthermore, by holding stocks in electronic format, the Demat account minimised the hazards of storage, theft, damage, and malpractices. NSE originally presented it in 1996. Initially, the account opening procedure was manual, and investors had to wait several days for it to be authorised. In this age and time, it takes lesser than 5 minutes to open your Demat account online.

The end-to-end digital method has aided in the spread of Demat, which has soared since the outbreak.

What exactly is dematerialization?

Dematerialization can be described as the process of transforming physical share certificates into electronic form. Guess what? It is actually easier to maintain it this way and then access it from anywhere on the globe.

If you are an investor who wants to trade online. Then you need to first create your Demat account with a Depository Participant (DP). The ultimate purpose of dematerialization is to ease the burden of having the requirement for investors to possess physical share certificates. It also allows very seamless tracking and monitoring of your holdings.

Previously, the process of issuing share certificates was time-consuming and complicated, which Demat has helped to revolutionise by speeding up the entire process and maintaining security certificates in digital format.

And once your Demat account is activated, you can convert all your paper certificates into a digital format. Make it happen by submitting all your physical securities with a Dematerialisation Request Form (DRF). Also, remember to deface each physical certificate with the words "Surrendered for Dematerialisation." When you return your share certificates, you will be sent an acknowledgment slip.

The Value of a Demat Account

A Demat account is a handy and technologically secure way to keep shares and assets. It does not allow any physical certificate theft, forgery, loss, and damage. You must know that you can transfer securities instantaneously by using a Demat account. Your shares are digitally transferred to your account after the deal is authorized. Furthermore, in cases of events such as stock bonuses, mergers, etc, the shares are credited to your account automatically.
 

By login into the website, you may see your Demat account information regarding these actions. You may trade on the go using your smartphone or desktop computer. Thereby, you do not need to go to the stock exchange to deal. You also save money on transaction fees because there is no stamp duty involved in the transfer of shares. These advantages and benefits of a Demat account encourage investors to trade more frequently, boosting the possibility for significant profits.

Having a Demat account has made it comparatively very easy to manage equities. The Indian exchanges currently adhere to the T+2 day settlement cycle made possible by the Demat account.

The Advantages of a Demat Account

·       Transferring shares is simple and quick.

·       It allows for digitally secured storage of securities, which eliminates the risk of theft, forgery, loss, and damage to security certificates.

·       Trading actions may be easily tracked.

·       Allows for the addition of beneficiaries at any moment.

·       Bonus stock crediting, rights issues and split shares are all examples of automatic crediting.

If you're new to the world of stocks trading, you might not have heard of the pre-demat account period, when shares and securities were kept 'physically' in the form of certificates and sheets of paper. Consider this: millions of reams of paper are dispersed over hundreds of thousands of investors who are still holding on to their equities.