Demat account or dematerialized account is an account used to hold shares and securities in digital format. The objective of demat account is to hold shares in electronic format in order to make share trading easy and convenient for the investors and traders.
NSDL and CDSL are two major depositories in India that provide free demat account services. These services are available for intermediaries, depository participants or stockbrokers. Each intermediary can levy demat account charges that may differ as per the volume held in each account, terms & conditions, and type of subscription between a depository and a stockbroker.
With growing digitization, the demand of demat account has increased over a period of time. It is an account that provides the facility of keeping shares and securities in digital or electronic or paperless format. Traders can buy and sell shares and securities online held in demat account from anywhere, thus, making trading process hassle-free and convenient for the trader. This account holds all types of investment an individual makes such as shares, government securities, bonds, exchange-traded funds, and mutual funds under one roof.
Dematerialization is basically a process of converting physical share certificates into electronic format, which then becomes a lot more easier to maintain and access from anywhere and at anytime. Any investor who wishes to trade online needs to open demat account with depository participant (DP). The objective of dematerialization is to eliminate the lengthy process to hold physical share certificates and thus, facilitates seamless tracking and maintenance of the holdings.
The depository participant (DP) is the middle person between the depository and the investor that offers the onlineDematservices to the traders and investors. Angel broking is a certified Depository Participant enlisted with the Central Depositories Services Limited (CDSL) in India.
Regular statement of investor’s trading account transactions and holdings are also provided by the depository participant.
The process of dematerialisation is expected to change physical share into an electronic arrangement over to begin exchanging on the web. The shares in the electronic format are held in a Demat account, so opening a Demat account online is an essential to online trading. Aside from holding your securities in electronic configuration, there are horde benefits reached out by this record. Thus, before you comprehend the upsides of dematerialisation, you need to initially comprehend what a demat account is, its highlights, and advantages.
Guarantees convenience – Demat account opening permits continuous administration of share exchanges as it works electronically. It takes out the requirement for the financial backer to be genuinely present to settle exchanges. Admittance to a demat record can be acquired advantageously through a PDA or PC. Change of securities into electronic values considers you the lawful proprietor of your shares. After this, authentications need not be moved to the organization's recorder.
Permits merging of bank account and Demat account – One of the advantages of a Demat account is that it tends to be connected to your ledger. This aides in working with simple exchange of assets electronically.
Nomination facility – Another benefit of demat account is that this account can be linked to the bank account of an investor. Thus, it provides nomination facility, which allows investor to grant authority to the nominee to operate his/her demat account in case of primary holder’s absence.
Safeguard transactions – Demat account eliminates any possibility of risk and thus, provides safety and security to the transactions done online. Hence, the risks associated with holding shares in the form of paper or certificates, such as fraudulency and theft, are averted.
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While using a demat share trading account gives the investor an opportunity to participate in share trading market and invest securely through online platform, it is also easier to deactivate the account at any given point of time. If the demat account has been inactive for a while, it is wise to deactivate the account, in order to prevent it from being falling prey to fraudulent activities.