A demat account is said to be an account in which the investors retain their shares by means of electronic format. In the demat account, stocks are held in dematerialized form. By dematerialization is meant the translation of physical shares into electronic form. You are needed to have account number relating to demat account so that you are able to settle all trades electronically. The demat account is just like a bank account wherein you keep the money,and all entries are entered in the passbook. In the same manner, securities can be retained in electronic format. You can open your demat account without having any balance relating to shares and can have zero balance in your account.
Need to have a demat account
In order to retain shares in their physical form is extremely intricate since it entails tedious paperwork, long drawn procedure and above all danger of shares that are fake. With the intention of carrying out trouble-free and flawless investing as well as trading, a demat account is necessary to do trade in the stock market of India. Though SEBI – Securities and Exchange Board of India has made it valid to trade 500 shares in physical form,this type of choice is no longer liked by the investors. In a demat account can be retained financial tools such as mutual funds, bonds, shares, government securities,etc. Consequently, it entails the procedure of translating into an electronic format the shares held in physical form and are also credited to the demat account of an investor.
Working of a demat account
In India are found two types of depositories like CDSL—Central Depository Services Limited and NSDL—the National Securities Depositories Limited, by means of whom different depository participants hold shares. If you undertake selling or buying of shares, by these depository participants,your account is debited or credited.
Need of such an exclusive account
If you are operating a demat account, you shall not be afraid of share certificates that are mutilated, delays due to postal means, and forged shares. It can be said that the best demat account in India is a secure and simple manner by which securities are retained in the similar fashion as funds are held in your bank account.
Benefits of a Demat Account
With the use of demat account processes of trading have become easy as it cut down all paperwork regarding transactions, doing away with manual means. Below are given a few advantages of dematerialization.
It is not necessary to take note of your multiple trading as well as bank accounts because all participants have information about your solo Demat account. All your shares, investment tools, bonds are found within that single demat account.
All your details concerning the demat account automatically are passed on to the third party. You are not required to submit information of the demat account in all places wherein you perform transactions such as mutual funds, shares, and bonds. Submission of this detail at one place will suffice all the needs.