Demat Account is an account that is used to hold shares and securities in electronic format. The full form of Demat account is a dematerialised account. The purpose of opening a Demat account is to hold shares that have been bought or dematerialised (converted from physical to electronic shares), thus making share trading easy for the users during online trading.
In India, depositories such as NSDL and CDSL provide Free Demat account services. Intermediaries, depository participants or stockbrokers—like Angel One—facilitate these services. Each intermediary may have Demat account charges that vary as per volume held in the account, type of subscription, and terms and conditions between a depository and a stockbroker.
What is Demat account?
A Demat Account or Dematerialised Account provides the facility of holding shares and securities in an electronic format. During online trading, shares are bought and held in a Demat Account, thus, facilitating easy trade for the users. A Demat Account holds all the investments an individual makes in shares, government securities, exchange-traded funds, bonds and mutual funds in one place.
What is dematerialisation?
Dematerialisation is the process of converting the physical share certificates into electronic form, which is a lot easier to maintain and is accessible from anywhere throughout the world. An investor who wants to trade online needs to open a Demat with a Depository Participant (DP). The purpose of dematerialisation is to eliminate the need for the investor to hold physical share certificates and facilitating a seamless tracking and monitoring of holdings.
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Importance of Demat account
A Demat account provides a digitally secure and convenient way of holding shares and securities. It eliminates theft, forgery, loss and damage of physical certificates. With a Demat account, you can transfer securities immediately. Once the trade is approved, the shares are digitally transferred to your account. Moreover, in case events like stock bonuses, mergers, etc., you get shares automatically into your account. Your Demat account information regarding these activities is available online by simply logging into the website. You can trade on-the-go using your smartphone or desktop. So, you needn’t visit the stock exchange to transact. You also enjoy the benefit of reduced transaction costs because there is no stamp duty involved with the transfer of shares. These features and benefits of a Demat account encourage a larger trade volume by investors, thus increasing the potential for lucrative returns.
How does a Demat Account work?
Trading through a Demat account is similar to the procedure of physical trading, except that a Demat account is electronic. You begin trading by placing an order through your online trading account. For this purpose, it is necessary to link both trading and Demat accounts. Once an order is placed, the exchange will process the order. Demat account details the market price of shares and the availability of shares is verified before the final processing of the order. On completion of the processing, shares are then reflected in your statement of holdings. When a shareholder wishes to sell shares, a delivery instruction note has to be provided with details of the stock. Shares are then 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 and Non-repatriable Demat account. Repatriable funds are deposited in a separate bank account known as the Non-Resident External Account (NRE account). Repatriable funds are those funds which can be transferred abroad. The investments made from these funds are maintained in a The Repatriable Demat account holds the investments made from repatriable funds. On the other hand, non-repatriable funds (funds which cannot be taken/transferred abroad) are deposited in a different bank account known as the Non Resident Ordinary Account (NRO account).The Non-repatriable Demat account holds the investments made from non-repatriable funds. Money can easily be transferred from an NRE to an NRO account. However, once the transfer is made, the repatriability is lost and the money cannot be transferred back to the NRE account.
Benefits of opening a Demat Account with Angel One
- Invest Easily & Earn Better
- Gain access to the award-winning Angel One App - Trade, learn, and stay updated on the go. The app gives you latest news, research reports, and real-time updates on your fingertips. It also offers Portfolio Health Check to help you maintain an ace portfolio
- Get a better chance of earning higher returns with ARQ
- Fastest account opening process - Start trading in 1 hour
- Highly secure & speedy financial transactions
In addition to the advantages outlined above, you can learn more about the benefits of online share trading in India with Angel One.
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Demat Account Glossary - Meaning of Demat Account Jargon
Bank account, trading account, and Demat account are the three essential necessities while dealing with investments. When you purchase a company’s shares, your ownership is marked with a certificate. This certificate is now available in electronic format and is known as Demat credit.
Central Depository (CD)
Central Depository is basically a central agency that maintains all the relevant information pertaining to Demat accounts that are opened with DPs throughout the country. India’s central depository agencies include National Services Depository Limited (NSDL) and Central Depository Services Limited (CDSL).
Depository Participants (DP)
The DPs or Depository Participants are fundamental intermediaries between the account holders and the Central Depository. DP’s include several banks, brokerage firms, and other financial institutions that offer investors with Demat accounts.
In order to buy and sell electronic securities, every investor needs a trading account, which is as important as a demat account. Every trading account is given a unique identification number that has to be used for all the transactions of an investor.
The Demat account of an investor keeps all his investment holdings of investors including: equity holdings, exchange-traded funds, mutual funds, government securities and bonds. All the holdings together are referred to as the investors’ portfolio holding, which they can access through their Demat account. All their purchases are reflected as Demat credits while all their his sale transactions are debited from the Demat account.
We hope that the information above clarifies how useful Demat accounts are. So, get started with opening a Demat account and enjoy its benefits.
More information on Demat account
What are the charges of Demat account?
The charges of Demat account vary as per the volume held in the account, type of account subscribed, and the terms and conditions laid by the depository and the stockbroker. While there are no Demat account opening charges, every stockbroker charges transaction/operation fees including the Annual Maintenance Charge (AMC). Failure to pay these fees may result in the freezing of the account.
How to open a Demat account?
In India, Demat account service is provided by depositories such as NSDL and CDSL through intermediaries / Depository Participant (DP) / stockbrokers such as Angel One. To open a Demat account, you need to contact the DP and fill out the account opening form. Once completed, you need to submit the form along with Proof of Identity and Proof of Address documents. The documents required to open a Demat account are identity proof like PAN card, copy of valid residence proof, existing financial balance sheets and recent photographs. Once the applicant’s details are verified, the application is processed. The broker then dispatches a welcome kit with details of the applicant’s User ID and password. One can access their Demat account using these details and begin trading in the stock market. It is essential that you open a Demat account with a reputed stock broking company like Angel One.
How long does it take to open a Demat account?
Usually, it takes about 48 to 72 hours to open a Demat account. However, with Angel One, you can get your Demat Account activated in one hour.
I have submitted my application. what happens next?
After submitting your application, the DP carries out a verification of the details provided on the Account Opening form. On completion of the verification, your application is processed and a welcome kit is dispatched. The welcome kit contains your user ID and password. You can then log into your account using these details and begin trading online. Your user ID and password are completely safe. Angel One does not dispatch the welcome kit containing the user ID and password to anyone except the client, as it contains confidential information. Once you receive your account details, it is advisable to login and change your password for security reasons
Whats is joint Demat account?
A Demat account can be held by a single as well as in a joint ownership. A joint Demat account can have a maximum of three account holders, which includes the main holder plus two joint holders. In effect, the joint holders acquire rights to the shares held in the joint Demat account.
Can I link Demat & trading account?
A trading account is different from a Demat account. While the latter only retains shares and securities, the former facilitates their sale and purchase. Shares purchased through a trading account may be deposited into the Demat account. Existing shares may also be withdrawn from a Demat account and sold through a <a href=”https://www.angelone.in/trading-account”>trading account</a>. The purpose of linking your trading account to your Demat account is to avoid the process of verification each time. This may also simplify trading. After the order has been sanctioned, shares are either removed from or deposited to your Demat account. When linking the Demat and trading accounts, it is also understand the difference between 2-in-1 accounts and 3-in-1 trading accounts. The 2-in-1 trading account basically integrates the trading account and the Demat account. The 3-in-1 account is offered by brokers that have banking operations within the group. Thus, ICICI Securities, HDFC Securities, Axis Securities and Kotak Securities are all able to offer 3-in-1 accounts due to their banking interface. While 2-in-1 accounts are a must to ensure seamless relationship between trading and Demat, the 3-in-1 is not a major advantage as most broking platforms will allow you to transfer funds almost seamlessly into your trading account.
Can I have two Demat accounts?
A trader may open multiple Demat accounts, however they can open only one trading account with a broker. Investors would want to have more than one Demat account if they are active traders and use each Demat account for a different trading strategy. However, they should also keep in mind the transaction and operation (AMC) fees associated with each account.