How to Transfer Money from Demat Account to Bank Account?

Last Updated: 26 Aug 2025

Capital markets have consistently remained an attractive investment option for those looking for high returns. Financial awareness about the profit potential of capital markets coupled with lower yields from traditional investment options has led to a growing interest in capital market investment in the recent past.

The interest in the capital markets is evident with the highest number of Demat accounts opened in the year 2020-21 which broke all the records in the history of the capital markets. However, it is never too late to start investing in the capital market if you want to earn higher returns than other financial instruments.

Before you start investing, there are a few fundamental processes and terms you should know. It is important to understand how to transfer money from a Demat account to a bank account, transfer shares between two Demat accounts, and withdraw funds to be sent back to your bank account to ensure that your investment journey is hassle-free. But first, you need to open a Demat account. After opening an account, you must know how to transfer money from demat account to bank account and vice versa.

What is a Demat account?

A Demat account is an online account where your bought securities are stored in digital form. Just like a bank account keeps your money, a Demat account safely holds your shares, mutual funds, bonds, and other investments as electronic records. This process, called dematerialisation, makes storing and handling investments easy and safe.

With a Demat account, you can easily invest in the stock market, hold your investments, and track or trade them whenever you want. Think of it like a warehouse where a shopkeeper stores products from the manufacturer before selling them to stores. In the same way, your Demat account stores your securities until you decide to sell them. To buy or sell these securities, you also need a trading account. The trading account connects your Demat account to your bank account. While the Demat account holds your stocks, the trading account handles the money part, showing how much cash is coming in or going out when you trade.

Opening a Demat Account

• Before understanding how to transfer demat balance to bank account, it’s crucial to know how to open one.
• Setting up a demat account is the first step toward seamless electronic shareholding. Begin by choosing a Depository Participant (DP), typically a bank, broker, or fintech platform, registered with NSDL or CDSL.
• Complete an account‐opening form and submit KYC documents: PAN card, Aadhaar, address proof, a recent photo, and a cancelled cheque.
• Most DPs now offer an online workflow using Aadhaar-OTP e-sign, eliminating physical paperwork.
• Next, undergo In-Person Verification (IPV). This is often a short video call where you display your original documents and state your name and date of birth.
• After IPV, read and e-sign the Rights & Obligations document that explains investor rights, DP duties, and tariff schedules.
• The DP then forwards your application to the depository; once approved, you receive a unique Beneficial Owner Identification Number (BO ID).
• Finally, link your Demat account with a trading account (for order placement) and a savings bank account (for fund settlement). You’re now ready to hold, buy, or sell securities in dematerialised form.

When Can You Transfer Money from a Demat Account to a Bank Account?

Demat balances represent sale proceeds that appear after trades are settled. You may initiate a demat account fund withdrawal only after the exchange’s T+1 settlement is complete, meaning one business day after the trade date for most equities. Once the credit reflects as “clear balance” in the DP-linked ledger, you’re eligible to move it.

The demat account to bank transfer process generally opens late afternoon on T+1 once your broker receives settlement funds from the clearing corporation. Weekends and exchange holidays extend this timeline; for example, a Friday sale will usually allow withdrawal on Monday evening. Intraday profits settle on the same T+1 cycle.

Selling shares and fund transfer are distinct actions. Executing a sell order merely converts holdings to cash within your trading ledger; you still need to place a withdrawal request to move cash to your bank. Most brokers cap daily withdrawal windows – say, 8:00 a.m. to 8:00 p.m. – and process requests in scheduled batches (NEFT/RTGS/IMPS).

Follow the Demat account payout procedure specified by your DP: log in to the trading portal, choose “Fund Withdrawal,” enter the amount (up to available clear balance), confirm via OTP, and submit. The money typically hits your bank within a few hours for IMPS or by the next working day for NEFT.

Transferring Money from the Demat Account to Your Bank Account

With a plethora of payment options available, you can easily transfer money from your Demat account to your bank account after selling some of your held securities. The entire process is online and hence paperless. You can do it conveniently on your mobile, tablet, or laptop.

Here’s how to transfer money from demat account to bank account:

• Log in to your trading account linked to your Demat account using the IIFL Capital Services Demat account app. Go to the ‘funds’ or ‘accounts’ section and click on it
• You will be presented with two options: add funds or withdraw funds.
• To initiate the transfer of money from the Demat account to the bank account, click ‘withdraw funds’.
• The account will display the total amount in your trading account. You will be asked about the amount of money you wish to transfer. Remember that you can only transfer the money received after the sale of securities in the Demat account.
• Each brokerage house will indicate the fund limit as per the trading leverage. This depends on the funds added to the trading account and your Demat account holdings. However, the fund limit does not equal the amount you can transfer.
• Enter the amount you wish to transfer and enter the bank account details. To initiate the transfer, enter your trading password. The amount will be credited to your bank account depending on your chosen mode of transfer.

Just follow the above steps if you aren’t sure about how to withdraw money from demat account.

Things to Keep in Mind While Transferring Funds

When moving money between your demat account and bank account, here are some important things to remember:

• All money transfers from a Demat account to a bank account happen through your trading account. A Demat account doesn’t actually hold cash; it only holds the securities you’ve bought. When you sell these securities, the money first goes into your trading account. That’s why the trading account is used to move the money.
• You can only transfer the money you earned by selling securities. That’s the amount you can withdraw or use.
• Don’t confuse your fund limit with the money you can transfer. Fund limit is the amount the broker allows you to use for buying more securities based on your current holdings. But this isn’t the actual cash you can send to your bank account.
• Most brokers support different payment options like UPI, NEFT/RTGS, and online transfers. The steps to transfer money are mostly the same, no matter which broker you use.

Conclusion

Moving money from your Demat account to your bank account or the other way around is easy, fast, and user-friendly. All you need to do is log in to your Demat account, choose whether you want to deposit or withdraw money, enter the amount, and type your trading password. The process will begin right away, and the money will be credited to or debited from your bank account.

You can try IIFL Capital Services for both trading and Demat accounts. It is considered one of the top Demat accounts in India, offering secure and smooth transactions in the stock market. Start building a strong investment portfolio and watch your savings grow by opening a Demat account today.

Frequently Asked Questions

1. What if I am unable to transfer funds online from the linked bank account?

If online transfer isn’t working, you can check with your broker to see if they accept funds through cheques or Demand Drafts.

2. What is the procedure to be followed when the funds transferred are not reflected in the Available Cash Balance?

If the amount is not showing in your cash balance, first confirm through net banking if the money was debited from your bank. If it was, note the Bank Reference Number and share it with the Customer Care team so they can update your balance.

3. How do I transfer funds set aside for Mutual Fund/ IPO investment back to my bank account?

• Log in to your trading account and go to the Money Transfer section.
• Select the option “Mutual Funds To Bank” and click Submit.
• You’ll receive a confirmation with a reference number.

If you still have questions about the Money Transfer feature, check the HELP section on the homepage.