The first time you decide to invest in bonds, stocks, shares, or other the financial securities, the question asked is – do you have a Demat account? You may wonder “what is the meaning of the demat account” or how it can help you when you buy, sell or trade any financial securities. Demat accounts the hold your financial securities such as equity or the debt.
Instead of holding physical records of your investments, they are stored in an electronic form in a the demat account. You can access your demat account like your bank account to view credit, debit and the balance.
An investor can control various the financial securities like shares, stocks, initial the public offerings, e-gold, bond
Uses of Demat Account
Many people are unaware of what a ths Demat account is and what is its use. Now that you know what a the Demat account is, let's take a look at its uses:
a.Secure Holding
The biggest use of a the Demat account is to keep your precious the financial securities in the safe confines of a ths national depository. Instead of worrying about keeping the physical records of your an investments safe from thieves, fire, the water damage, you can rest assured that your the stocks and shares are in a central electronic location that is the protected with heavy an encryption.
b.Dematerialization
Investors may keep the physical records of their shares, stocks, bonds or an other the financial investments. If they want to the convert these the records into electronic form, they can opt for dematerialization. Once an investor has a functional demat account, they can fill out a demat request form (DRF) to initiate the process of converting the physical record of their investments into a convenient electronic form. DRF is available with every Depository Participant. Every form of security has its own International Securities Identification Number which means the investor will need to fill a separate DRF for each security they wish to dematerialize. After filling the DRF, the investor has to submit the form along with the physical record of investment to the DP. The next step an involves verifying the an information on the DP and DRF and updating the demat account an accordingly. A demat account can also be an used to ‘rematerialize’ i.e. the convert dematerialized securities into the physical records when the need arises.
c.Investment Transfer
A Demat account can facilitate the transfer of financial securities from one account to another. All the investor has to do is fill the delivery instruction slip with accurate information like investor details, and the transfer can be facilitated.
There are no restrictions on the types of securities that can be transferred from one demat account to another.
d.Avail a loan
An investor's holdings can be used as collateral when applying for a loan. Like your physical assets like car, house or jewellery, the investments held in your demat account will act as security through your loan tenure.
e.Corporate Activities
It can be difficult to keep track of all your investments such as shares, stocks, and bonds. When there is a bonus issued, share split, merger or consolidation happening, it directly affects the position of your securities. A demat account ensures that all your demat securities are updated as per the changes made by the company whose shares or stocks you hold.
f.E-Transaction
NSDL allows the account holder or investor to transact online and submit the e-slip to their respective depository participant to close the transaction. This makes it easier for the investor to transact without much delay.
g.Freeze Account
Imagine a scenario where you have lost the physical copies of your share certificates. It would be a laborious process to inform the company of the loss, lodge a complaint, re-issue copies and deal with additional costs like stamp paper duty. With a demat account, there is no worry of going wrong or losing your securities. Even if you need to freeze your investments for any reason, you can do it by temporarily freezing your demat account.
Types of Demat Account
In ancient times, there were paper share certificates and they were traded in this form, which involved a lot of paper formalities. Now a demat account has become its alternative. Since most of the transactions take place online, an investor can trade easily.
There are two types of Demat accounts-..
Basic Services Demat Account (BSDA)--This account is for investors whose holding value of investment certificates or securities does not exceed a few lakh rupees. Therefore, its annual maintenance charges are low.
Regular Demat Account--The only difference between this account and BSDA is the fee conditions. Charges are higher for regular demat accounts. However, these accounts are convenient and offer many services for a fee.
How Demat Account Open
The process of opening the Demat account is 2 kind. Demat account can be opened in two ways:
A.Online
B.offline
Step 1- If you want to open your Demat Account Offline, then a Depository Participant (DP) NSDL (The National Securities Depository Limited) or CDSL (Central Depository Services (India) Limited) is a broker or all-broker contacted them Can go. form of the opening.
Step 2- You have to engage the photocopy of some documents for proof of identity and proof of address.
Step 3- You have to sign an agreement with DP in the departure set standard format, which gives details of investors and DP rights and duties. You are entitled to receive a copy of the agreement and schedule of charge for future reference.
Step 4- Then DP will open an account and will give you the Demat account number. It is also called a Beneficial ONER Identification Number (BO ID). All your purchases/investments in Securities will be deposited in this account. If you sell your security, your demat account will be debited. Many work as bank and institute depository participants. There are many Nizza Financial Institutes in the country that are acting as DP, from which you can contact and open your Demat account.
Online Demat Account
If you want to open your Demat Account online then you can open your Demat Account online by visiting a bank or broker's website. The names of the banks have given in the list below which also opens the demat account online.
Demat Account Banks
Many banks in India open the demat account. List of Banks to Open Demat Account-..
a.ICICI Securities Ltd.
b.State Bank of India
c.HDFC Securities Ltd.
d.Axis Securities Ltd.
e.Kotak Securities Ltd.
Demat Account Charges
Demat account fees are also filled to open the Demat account that is taken as different amounts by different banks and stock brokers as well as after opening the demat account You also have to give Demat Account Charges, which you have to pay as a fee every year instead of the service of the Demat Account. To open the Demat account, you will have to pay some charges. These charges are of many types.
a. Annual Maintenance Fee
b. Guard duty
c. Transaction fee
Benefits of Demat Account
a. There are many benefits of keeping a demat account over keeping physical records of your financial securities.
b.These include: There is no risk of theft, loss or fraud as all securities are in electronic form and there is a centralized depository.
c.Accessible from anywhere at all times; Minimal physical effort is required to carry out transactions.
d.Single platform to hold all your different investments (debt or equity) for easy access.
e.You get automatic updates on the demat account; There is no need to manually register changes in the status of financial securities.
f.One can buy, sell, and trade even one share, unlike physical marketplaces where securities are traded only in lots.
g.The investor does not have to pay any stamp duty as no physical record of traded financial securities is required.
h.This helps reduce costs for the investor. Minimal to no tedious paperwork to carry out transactions.
Demat account charges
There are some fees for opening Demat, which are charged by different banks and stock brokers in different amounts, and after opening the Demat account, there is also its Annual Maintenance Charge, which is You have to pay a fee every year for the service of Demat account.
Whenever you go to a bank or stock broker to open a Demat Account, you must know about the fees there so that you do not have to pay unnecessary extra charges.
Why is a Demat account needed?
First of all, know why you need a demat account despite having a savings account. You deposit your money in your savings account in a bank. That account only deposits money, nothing else. But money is not deposited in the Demat Account, rather whatever Share or Bond you buy is deposited. In fact, by keeping the shares deposited in the Demat account, you can buy and sell them faster. Thirty years ago, when there were no Demat accounts, shares were used to reach people's homes. And this work took months. But now the shares reach your demat account within a day. This much speed has come because now share is not a certificate written on any paper. Rather, only its number is added to your account.
Like currency notes are not kept in your bank account. Rather, your money is accounted for. In the same way, shares are accounted for in the demat account. In this way, the Demat Account keeps track of your Shares, Bonds, and Mutual Funds. And whenever you sell it, it is deducted according to you, and the money you get after selling comes to your savings account.
