A Demat account provides a digitally secured and convenient way of holding shares and securities in the stock market. It also eliminates theft, forgery, loss, and damage of any physical certificates. When someone opens a Demat account, they can transfer securities immediately. Moreover, in case of events like stock bonuses, mergers, and many more. Then, they get shares automatically into their account. The following are the basic steps to open demat account:
Step 1: Fill up all the necessary information while filling up the sign-up form.
Step 2: Then, they have to enter the OTP received on the registered mobile number of the customer.
Step 3: They have to enter all the KYC details.
Step 4: They will then get all the Demat Account details on their registered Email ID.
Demat Account or Dematerialisation Account is used to electronically store all the investments like Shares, Mutual Funds, ETFs, Bonds, Government securities, and others without any kind of paperwork.
Initially, the stocks and shares used to be exchanged via physical receipts called certificates. This included various lengthy paperwork and took up a lot of time.
How does a Demat Account work?
Trading through a Demat account is a quite similar process in comparison to the procedure of physical trading, except that a Demat account is electronic.
- The trading begins by placing an order through their online trading account. For this purpose, it is essential to link their trading and Demat accounts.
- Once an order is placed in the stock market, the exchange will process the order.
- On completion of the processing of these accounts, shares are reflected in their statement of holdings.
- After that, shares are debited from the account and the equivalent cash value is credited to the trading account.
Types of Demat account:
There are two types of Demat accounts:
- Repatriable Demat account:
Repatriable funds are deposited in a separate bank account called the Non-Resident External Account (NRE account). Repatriable funds are those funds that can be transferred abroad without any hassle.
- Non-repatriable Demat account
Non-repatriable funds (funds that cannot be taken/transferred abroad) are deposited in a different bank account called the Non-Resident Ordinary Account (NRO account).
These accounts can further be classified into the following types:
- Regular Demat account: Regular Demat account is mainly for those Indian resident investors who want to trade in shares alone and need a storing for securities.
- Basic Services Demat Account: Basic services demat account is a new type of Demat account that has been introduced by the SEBI. These accounts don’t have any maintenance changes if the holding value is less than Rs 50,000.
Advantages of Opening a Demat Account
Demat account is one of the most renowned stockbroking houses.
Main features of a Demat account:
- Free:One can get their Demat account free of cost. Some websites don’t charge for opening a Demat account. However, there are annual maintenance charges when they maintain an account with them.
- Tracking: When someone opens the Demat, they get qualified to receive monthly statements on their mobile and email id. The tracking features allow them to watch account activities and manage actions.
- Seamless service: The Demat account allows seamless and fast linking with the bank account for a holistic experience.
Conclusion The above article mentioned the demat account meaning and the various types of Demat accounts along with the steps to open a Demat account. It is an easy process and makes trading in the stock market easy and viable. One must have a Demat account to trade in the stock market more safely and securely.