Published : September 13, 2018
When was the last time you met someone holding shares certificates of a company in his hands? Or someone who had to go all the way to the registered office of a company to buy its shares or debentures or any other security? Cannot even recall right? Not your fault. Demat account has taken place of the physical form in India long back.
Because indeed the practice of purchasing, selling and holding of securities in their physical form has long been redundant. Holding shares or securities of any kind in their dematerialized form is the evolution. This is swaying around the world today or rather a necessity or demand of the present day.
Thanks to the incredible advancements in information technology that is moving everything else from paper to the screens of your devices, so why not shares and other securities too?
This blog is divided into four major parts:
Let’s get into it and begin:
In the simplest terms, dematerialized account or demat account allows the investors to hold and manage their shares and securities electronically. With the passing of the Depositories Act, 1996, all the transactions around the handling of securities have become significantly quicker and hassle-free. Therefore, in today’s times, everything from purchase, sale, and holding of shares and securities to the credit or debit of any related costs or charges or interests is undertaken through your demat and trading account only.
Owing to this mandate passed by SEBI in the year 1996, it is now compulsory to have a demat account in case you would want to invest your money in the stock market. Therefore, if you want to trade on a stock exchange say BSE or NSE, you need to have a demat account.
Dematerialisation is a whole new wave of how the stock market operates in the present day.
This is a frequent and common query that comes to the mind of anyone entering the stock market or anyone who is beginning with his investments in shares and securities.
A demat account is more like a medium to store/hold the securities that you already have in your portfolio. But you cannot buy or sell through your demat account, for that, you need a trading account. A trading account is like an intermediary between your bank/ savings account and your demat account.
Your broker can help you get both demat and trading account at the same time from the same place, make sure you inquire carefully at the time of your interaction with the representative.
How – In present times, opening a demat account is as simple as filing an online form or making a call, meeting your broker agent and then providing your respective details. Just visit the respective website, fill in the form or grab their contact number and request a face to face interaction before you go ahead.
Where – Before we tell you where we need you to know the difference between a Depository and a Depository Participant (DP).
A Depository holds a pre-pool of verified shares and securities to ensure efficient flow of buy and sells and other related transactions while a DP acts as an agent between the Depository and the Investor. A DP can be a bank, broker or any financial institution. For example, If I want to buy stocks from a particular company, I would place a request for buying with my DP who would then buy the same securities on my behalf from the Depository. There are only two Depositories in India namely NSDL and CDSL while there are hundreds of authorized DPs.
Here is a list of the top brokers or DPs with whom you can open a demat account:
You can keep multiple securities in a single account and accordingly managing the whole of your portfolio becomes much easier and quicker for you.
Dealing online is so much hassle free and quick, you no more need to visit the company itself and invest abundance of your time into procedural formalities. If an investor buys a share today, it will be credited to his/ her demat account in no later than 2 business days. That’s quick, right?
Of course, once things go online, barriers like the location of the investor and the investee no longer hold good. You can transact from anywhere at the ease of your own preference.
This is where things like the odd lot premium come in, previously if the number of your transactions was below a specified lot, you would need to pay premiums for the same but now you can easily transact in as low as one share or security.
Read below to know “What all securities you can keep in a demat account”.
You no longer have to pay stamp duty on the agreements entered into between you and your depository participant and thus you can save costs on the registrations and dealings.
Of course, demat accounts eliminate the need to communicate with the companies and undertake all the procedural formalities at your end. Your direct communication with your depository participant shall help you get things done quickly.
After all, who wants to live with tonnes of physical paper certificates around them and fear their spoilage over time.
You can trade in various securities through your trading account and then hold/ keep all of these in your demat account including:
What’s more is that you might soon start receiving your academic certificates and mark sheets in a demat form! Earlier this year, the union cabinet gave its nod to the proposed idea of creating a national database for academic certificates or the National Academic Depository. This is a huge step which is going to benefits all of us in a number of ways including, no more worries about the spoilage of physical certificates over a period of time, no more fake or forged certificates, a step further in saving our environment, ease of management and the like.
So get started right away and get the best on stocks and commodities trading in India, just click here for the best stock broker!
Thus, though it is not mandatory it is not less than mandatory account now. Every Indian whether rich or poor, young or old need to have one demat account like a bank account.
If you still have any questions and would like some professional help? Let our experts do the thing for you, just post your questions in the comment box below and our team shall reach out to you with the right answers soon!
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