Account that provides the facility of holding shares and securities in electronic format is called DEMAT account. Account holder can buy and order their share through this account. DEMAT Account stores information about mutual funds, trading exchange information, bonds, government securities funds and other useful records. Account holder gets the authority to access and handle these facilities from one platform.
Demat account is a short form of dematerialized account that allows to account holders to be the owner of the shares and securities in electronic format. Dematerialization is the process of converting share certificates in electronic format which makes it easy and convenient for the accountholder to keep and maintain the shares from anywhere in the world.
In the electronic trading system, the shares are brought and held in a demat account that facilitates convenience of easy trading for the shareholders. An account holds all the investment made by an individual in shares, exchange traded funds, government securities, bonds, and mutual funds, all at one place.
The online trading services are provided by depositories such as NSDL and CDSL through the network of intermediaries, depository participant, and stock brokers. The charges vary according to the volume held in the account, subscription type, and the terms and conditions laid by the stock broker and the depository.
In simple words, demat account is more than similar to a saving or current account, the only difference is that the account holds securities such as shares, debentures, mutual funds, exchange traded funds, bonds, and government securities, instead of holding cash. The account acts like an alternative for holding securities in the form of physical certificates.
It is mandatory for the company enrolled in a stock exchange to offer the securities in both physical and dematerialized format; where, physical securities denote the original certificate, whereas, dematerialization converts the physical shares in the digital format along with the entire information about the shares of a company owned by an individual.
Therefore, to buy or sell the securities in Indian Stock Market, an individual is required to open a demat account. Such account reduces the risk of share certificate fraudulent, postal delays, and counterfeit shares because the online mode of holding the securities is quite safe and convenient.
Demat account offers most secured way to handle and mange your account related securities and allow instant transaction and approval facility easily. Account holder will get protection from online trapping, financial trapping, Damage of physical certificate, forgery, thefts and several other possible threats. You will get facility to track and access your account from anywhere as per your interest and need. User will also get freedom from paying stamp charges and custom charges.
|Proof of Identity||Proof of Address||Other Documents|
|Aadhar Card||Aadhar Card||ITR Statement|
|PAN Card||Ration Card||Bank Statement|
|Voter's Id||Rental Agreement||Applicants Cheque Book|
|Passport||Electricity Bill||Two Passport Size Photograph|
|Driving License||Telephone Bill||-|
A Copy of PAN Card As per the instruction of the National Securities Depository Limited (NSDL), it is mandatory to submit a copy of PAN card while opening demat account, in order to avoid the existence any fake trading account.
Individual Verification To open a demat account, an applicant is also required to submit the copy of documents including Voter ID, passport, saving account details, and hardcopy of an application. However, the NRIs and foreign nationals are provided the flexibility to escape the session. Thus, they can send all the mandatory documents such as duly filled account opening form, identity, and residential proof via post. The documents need to be duly attested either by the consulate general of the country or by the Indian embassy.
It is somewhat similar to physical trading; the only difference is that it works on electronic platform. The trading begins with the orders placed through an online trading account. Thus, it is mandatory to link both demat and trading account. The exchange security board will process the order once it is placed and the owner will get the entire details along with the current market price and the availability of the shares.
Also, when a shareholder decides to sell the shares, the instructional note is sent to the account holder with details of the stock. On finalizing the process, the shares are debited and the equivalent cash value, against the shares sold, is credited to the trading account.
This online trading system was first introduced in the year 1996 under the Depository Act which made the dealing process of securities quite easy, reliable, and convenient. The system reduced the involvement of paperwork to almost zero. The system also comes with great transparency that reduced the risk of confusion and fraudulent.