Whether you are a professional trader or just a beginner, you cannot ignore the need for a Demat account. When you start your trading journey, you will be asked to open Demat account to trade from anywhere in the world. It is a hassle-free mode of storing and holding your securities electronically.
What is a Demat Account?
Before realising the benefits, it is important to understand what is Demat account. It is a specific account that stores securities electronically. Dematerialisation is the process of converting the physical share certificates into electronic format. This specific account will allow you to trade in the share market with ease and security.
How Demat Account Works?
It works similar to a normal bank account that stores your money. The Demat account converts the physical share certificates into electronic format. When you want to step into the stock market, you need to open a Demat account with a depository participant.
There are mainly two types of Demat providers in India that facilitate Demat services: National Securities Depository Services Limited (NSDL) and Central Depository Service Limited. For instance, when you buy or sell from NSE (National Stock Exchange) or BSE (Bombay Stock Exchange) and once your share is cleared, it will be credited to the Demat account which is managed by the depository participant.
What Are The Features of Demat Account?
- Secure Transfers: Prior to the time of the Demat account, shares were sent to the company and later transferred to the investor’s name. The time-consuming process often makes the entire process much more difficult. Demat account makes it easier to transfer shares instantly.
- Fast Procedures: When the physical shares are converted into electronic format, all the hassles and troubles are eliminated. Demat makes the entire process faster and easier.
- Corporate Benefits: When your business has a Demat account, all your profits will be transferred to your account without fail. For instance, if you have invested in dividends, all the returns on the investment will be transferred to your account.
How To Open Demat Account?
Now that you have learnt the crucial things about Demat accounts, it’s time to learn how to open a Demat account.
- Choose a depository participant you need to open your account with.
- You need to fill a Demat account for, and attach all the supporting documents with it, including proof of identity, address, income, etc. It is necessary to attach your PAN card as well.
- A copy of rules and regulations will be provided to you that will also have the charges of your respected DP. You will have to go through an in-person verification.
- After the DP thoroughly verifies your documents, and you have cleared the in-person verification, your Demat account will be opened right away.
The Bottom Line
Demat account is mandatory while dealing in the share market. Storing and managing your securities electronically. It is imperative to understand the nitty-gritty of Demat account so that you can make the most of its services. The above mentioned were some of the essential details regarding the Demat account.
