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What Is A Demat Account?

How it helps?
  • Zero maintenance charges
  • Zero fees for demat account opening
  • Volume based brokerage
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Publish Date: November 18th, 2019

By: Sandhya Kannan, Head – Content

A demat or a dematerialized account is an account which holds your shares and securities in an electronic format. Before the introduction of the demat accounts in India in 1996, investors used to hold physical share certificates, requiring lengthy paperwork.

A demat account is mandatory for individuals looking to invest in stocks. The demat account is held on your behalf by either of the two depositories registered with SEBI--the Central Depository of Securities Ltd. (CDSL) or the National Depository of Securities Ltd. (NDSL). You can use this account to buy and sell shares and hold different investments such as bonds, government securities, mutual funds, and ETFs.

Types of Demat Account

1.   Regular demat account: This account is used by traders residing in India.

2.   Repatriable demat account: This account is used by non-resident Indians (NRIs), and it facilitates the transfer of funds abroad. NRIs wishing to open this account also require a non-resident external (NRE) bank account.

3.   Non-repatriable demat account: This account too is for the NRIs. Unlike the repatriable account, this account cannot be used for fund transfer abroad. Further, a non-resident ordinary (NRO) account is required to be associated with this account.

Differences between the different types of demat accounts
Regular
Repatriable
Non-repatriable
Account holder Indian citizens NRIs NRIs
Additional Bank Account required Regular savings bank account NRE account NRO account
Transfer of funds abroad NA Yes No


Read more: How to open Demat account without aadhar card

Benefits of the demat account

  • Eliminates the lengthy paperwork required for storing physical certificates
  • Reduces the risk of theft, damage, or loss of physical certificates
  • Facilitates monitoring and tracking investments through a single account.
  • Eliminates additional costs such as stamp duty and handling charges
  • Offers seamless and rapid transactions

Features of the demat account

  • Ease of dematerialisation (conversion of securities to electronic format) and rematerialisation (conversion of securities to the physical format)
  • Use of securities as collateral for loans
  • Ease of transfer of investments

Online and Offline Trading accounts

Offline, as the name suggests, are the accounts that do not offer trading facilities over the Internet. To execute any trade, you need to visit your broker and complete the necessary formalities.

An online trading account offers the ease of executing trades over the Internet. Trades can be executed from any location as long as you have a good Internet connection.

Different types of online trading accounts provided by various brokerage firms are 2-in-1 account and 3-in-1 account. A 2-in-1 account is a combination of the Demat and the trading account. A 3-in-1 account combines your Demat, trading, and bank accounts, eliminating the need for separate accounts.

So, whether in India or abroad, open your demat account or go for a 2-in-1 or a 3-in-1 account that best suits your requirements and get on with your trades today!

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