Importance of a Demat Account

Last Updated: 16 Oct 2024

If you want to participate in an Initial Public Offering (IPO), purchase shares, and start trading in stock markets, one of the first requirements is to have an online Demat Account. A Demat account holds your shares and securities in the electronic format and like your bank account, it holds the record of the sales and purchases of your shares.

Why an electronic format?

Any investment made in the physical form is cumbersome and entails a lot of paperwork. To prevent any discrepancy, and to streamline the process of online trading, the shares are converted into the electronic format which improves the accessibility of your shares and securities.

Holding the shares and not trading in stock markets

• If you want to participate in an IPO, and purchase certain shares, you need to open a Demat Account and if someone wants to give/gift your shares, then again you require an online Demat Account.
• You must understand that a Demat Account just holds your shares or securities. To begin trading in stock markets, you require a trading account and a bank account. However, if you just want to hold the shares, then you do not require any other accounts other than a Demat Account.

What kind of investments can be held in a Demat Account?

You can hold a wide variety of investments in your Demat Account. These are:

• Equity shares
• Exchange traded funds
• Mutual Funds
• Bonds
• Government securities

Is the minimum amount of balance required for shares or securities in my Demat account?

You can open a Demat Account in the Demat account app without actually possessing any shares. Just like savings bank accounts, you are allowed to maintain a zero balance in your Demat Account.

Advantages of Demat Account

Advantages of Demat Account are listed as follows:

1. Transfer your shares: You can use your Demat Account for transferring your physical shares. You just require a Delivery Instruction Slip (DIS), where you have to provide the requisite details.
2. Loan Facility: A variety of loans can also be taken through Demat Account. All you need is to pledge the securities in your Demat Account as collateral.
3. Dematerialisation and rematerialisation: If you have an online Demat Account, then converting your shares to electronic form is easy(dematerialsation), or vice versa(rematerialisation), depending upon the exigencies of the situation. All you need is to provide your Depository Participant (DP) with the necessary instruction.
4. Easy accessibility: Digital accounts can be easily accessed from a slew of devices like computers, laptops, tablets or smartphones and can conduct any operations like investing, trading and monitoring.
5. Corporate benefits: A Demat Account helps you get corporate benefits which are that the company provides dividends, interests or refunds, which will automatically accrue in your account.

Opening a Demat account?

• Select a Depository Participant of your choice.
• Fill the account opening form, and provide the required documents, including a PAN card.
• You will receive a copy of the rules and regulations along with the terms of the agreement, and the charges you need to pay.
• Now the process of in-person verification will begin, where an agent of the DP will verify your details.
• Post-verification, your application will be processed, and you will receive an account or client ID number.
• Now you can start using your online Demat Account.

Conclusion

Thus, having a Demat Account is of paramount importance if you want to hold shares or securities, and start trading in stock markets. All you need to do is open an online Demat Account with a trusted partner who can provide a smooth platform to open your account, besides providing cutting-edge data and analysis to help you stay ahead in the journey of stock trading. Opting for a 2-in-1 Demat-cum-Trading account is ideal to facilitate the easy buying and selling of shares.