A Demat account also referred to as a dematerialised account is meant to hold share certificates and financial securities in electronic form. Having a Demat account in today’s world is almost indispensable to maintain track of all the investments made by an individual in shares, bonds, exchange-traded funds (ETFs), insurance and mutual funds in one place. Demat accounts in India were introduced in 1996 and are maintained by two depository organisations, National Securities Depository Limited and Central Depository Service Limited. The bank acts as an intermediary between the investor and the depository.
In today’s date, a Demat account is a must for someone interested in trading/investing in the stock market (NSE & BSE) or any alternate securities. The primary reason for maintaining dematerialisation accounts is digital security and accessibility. In the older days, shares were held in the form of physical certificates which were inconvenient and vulnerable to theft, forgery, tampering and loss alongside being susceptible to error and delays. Dematerialisation makes this entire documentation process hassle-free and seamless.
Demat accounts are generally accompanied by trading accounts which are prerequisites for buying and selling shares in the stock market. The basic difference between Demat and trading accounts is that while a Demat account contains the details of all the securities (shares, etc.) in your name, a trading account is required for enabling you to purchase and sell shares.
Apart from offering a safe entry into the world of the stock market, a Demat account also serves as a security deposit for your savings. Apart from the fact that you can access your Demat account anywhere, anytime through your smartphone and laptop, here are some of the reasons why you should consider opening a Demat account.
When you open a Demat account, you need to save your securities in Demat mode and make sure they are listed on NSE and BSE. An appropriate understanding of the types of Demat accounts and their classification aids in more meaningful stock market participation and selecting the type of account best suited for you.
Types of Demat accounts:
Regular Demat Account: This is for traders who are residents of India. This type of account is ideal for individuals dealing in equity shares alone. For someone who is on the lookout for trading in futures and options, a regular Demat account is not required since futures and options have an expiration date and need not be stored.
Repatriable Demat Account: This type of Demat account is meant for NRIs and permits the transfer of wealth abroad. NRIs will have to use an NRE (Non-Resident External) or NRO (Non-Resident Ordinary) account to redirect their investments.
PINS account (Portfolio Investment NRI Scheme) allow NRIs to buy and sell equities through stock exchanges in India. These are of two types NRE and NRO PINS accounts. The NRO PINS accounts do not permit fund repatriations for executed transactions but an NRE PINS account allows funds to be repatriated to foreign countries.
Non-Repartiable Demat Accounts: This one is also meant for Non-resident Indians but does not allow transfer of funds abroad. This account mandates having an associated NRO bank account.
Just follow the steps mentioned below to open a Demat account: