Demat account is something which you need to have if you want to invest in shares and stock market. If you are planning to invest in equity shares, trust me physical form is difficult and involves lengthy and so much paperwork.
To ease up transactions, settlements and eliminate the risk of holding physical share certificates they introduced this account. Converting and storing physical shares certificates and other securities in an electronic format known as Dematerialization.
Your shares, bonds, Mutual funds, Insurance, ETFs, and government securities are easy to maintain and handle with your this account.
Why it’s required?
- To transfer shares of the investors.
- Gives access to multiple operations like investing, monitoring, trading, and many other financial operations using the internet facility.
- You can apply and get loans against these securities as collateral to secure a loan from your bank
- Easy to receive the physical share certificates converted into electronic form and even get the electronic securities converted back to the physical form as per your requirements.
Types of Demat Account
There are 3 types of account you can have :
- Demat Regular Account: This is for Indian citizens who live in the country.
- Demat Repatriable Account: This kind of Account is for non-resident Indians (NRIs), which enables money to be transferred abroad. However, this type of Account needs to be linked to a NRE bank account.
- Demat Non-Repatriable Account: This again is for the NRIs, but with this type of Account, fund transfer abroad is not possible. Also, it has to be linked to an NRO bank account.
You can open a Demat Account having no shareholdings. There’s no mandate to maintain a minimum balance. You can open it with any of the central depositories, and it have annual fee attached which need to get checked with your bank.
Also read: Financial lessons for teenagers
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© Ruchie Verma.
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