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Demat Account: Meaning, Benefits & How to open a Demat Account

  • Highlights

  • Eliminates the risk of paper based share certificates

  • Convenient share storage and transfer

  • Stores various investments

  • Easily accessible online

What is Demat Account

A Demat Account helps the investors hold shares and securities in digital or electronic format. Basically, demat account full form is a dematerialised account. Demat accounts are maintained by Depository Participants (DP) in India and there are two DPs which are NSDL (National Securities Depository Limited) & CDSL (Central Depository Services Limited). It helps to keep a proper track of all the investments an individual makes in shares, exchange-traded funds, bonds, and mutual funds in one place in an organised manner. Apart from keeping your securities in a proper way, it also helps to reduce risk of misplacing a share and make it easy to hold them.

IMPORTANCE OF DEMAT ACCOUNT:

A Demat Account provides the traders a digital platform where they can hold the shares with utmost security. It also eliminates theft, forgery, loss, and damage to the shares as the shares are converted to electronic form from physical certificates. As all the transactions are conducted on digital platform, the transfer of shares is quick and seamless.

What is Dematerialisation (Demat)?

Dematerialization is basically, the process of converting the physical share certificates into electronic form, which is easier to maintain and can be accessed from anywhere. Demat account full form is a dematerialised account. Earlier, the shares were held in the form of physical certificates which were cumbersome to store and transfer. The advent of Demat Account made it a lot easier to handle the shares. An investor who wants to convert his physical shares into digital form needs to open a Demat account with a Depository Participant (DP). 


What‌ ‌are‌ ‌the‌ ‌types‌ ‌of‌ ‌Demat‌ ‌account?‌

There‌ ‌are‌ ‌three‌ ‌types‌ ‌of‌ ‌Demat‌ ‌account‌

a. Regular‌ ‌Demat‌ ‌account:

‌ ‌It‌ ‌is‌ ‌used‌ ‌by‌ ‌Indian‌ ‌citizens‌ ‌to‌ ‌hold‌ ‌the‌ ‌shares‌ ‌purchased‌ ‌online.‌ ‌ ‌

b. Repatriable‌ ‌Demat‌ ‌account:

‌ ‌This‌ ‌demat‌ ‌account‌ ‌is‌ ‌for‌ ‌NRIs‌ ‌who‌ ‌can‌ ‌transfer‌ ‌the‌ ‌funds‌ ‌overseas.‌ ‌The‌ ‌account‌ ‌has‌ ‌to‌ ‌be‌ ‌associated‌ ‌with‌ ‌an‌ ‌NRE‌ ‌account.‌ ‌

c. Non-Repatriable‌ ‌Demat‌ ‌account:

‌ ‌This‌ ‌demat‌ ‌is‌ ‌also‌ ‌for‌ ‌NRIs,‌ ‌but‌ ‌they‌ ‌cannot‌ ‌

Benefits of Demat Account ‌ ‌

  • Eliminates the risk of paper-based share certificates: Before the advent of Demat Account, the shares existed as physical paper certificates. If you held shares of a company, you had to safe keep a dozen of paper certificates. These were vulnerable to tampering, theft, loss and forgery. Moreover, the transfer of shares involved lengthy paperwork that was prone to error and delays. With Demat Account, all these shares can now be stored electronically in a safe and secure digital repository.

  • Convenient share storage and transfer: Also, it allows you to store any number of shares, so you can trade in volumes and monitor the details of all the shares you are holding in a Demat Account. It further facilitates the swift transfer of shares while trading online.

  • Bonus, Stock-splits get automatically updated: If the company whose shares you are holding, takes an initiative that brings in a change to its stocks such as bonus issue, stock split, etc., it will be automatically get updated in your Demat Account.

  • Stores various investments: Besides the shares, Demat Account can also hold your multiple investments, like bonds, mutual funds, Exchange Traded Funds, Government Securities, etc.

  • Easy Access Online: You can access your Demat Account anytime, anywhere through your smartphone or laptop.

  • Nomination: Demat Account also provides the facility of nomination as per the process described by the depository. In case of investor’s demise, the shareholding in the Demat Account can be transferred to the appointed nominee.

Additional Read: How to Open Demat Account Online

How to open Demat Account

To open a Demat Account, you start with reaching out to a stockbroker, like Bajaj Financial Securities Limited (BFSL). You have to complete an online account opening form, which is 100% paperless and can be completed in less than 15 minutes. Below are the steps to open Demat and Trading Account with BFSL

  • Open the account opening form

  • Enter your details like name, email id, phone number, address, etc. and your PAN number.

  • Add your bank details

  • Upload the necessary KYC documents for address and identity proof

  • Perform an in-person verification by recording a short clip of yourself

  • E-sign the form through Aadhar linked mobile number

After submitting the application, you will receive a confirmation regarding your account getting opened along with your login credentials.

Additional Read: Difference Between Demat and Trading Account

How to use a Demat Account?

Demat Account is an account which hold the shares and securities in digital or electronic form. Other than shares, it also holds a variety of products such as bonds, mutual fund, government securities or exchange-traded funds. Using a Demat Account is simple. Your Demat Account is linked with your trading account, which in turn is linked with your bank account. To begin trading, you need to transfer funds from your bank to the trading account.
After adding funds, you can place an order to buy shares using your trading account. Once the order is executed, the shares will get transferred to your Demat Account by the end of T+2 days, where T is the day the order got executed. Since both Demat and Trading Account is closely integrated, all these actions happen swiftly and seamlessly.
Similarly, you can sell a share in your Demat Account by placing a sell order in the stock exchange using your Trading Account.

Demat Account Faq’s

Is Demat account safe?

Yes, demat accounts are safe. Every Demat account is governed by either of the depositories - National Securities Depository Limited (NSDL) and Central Depository Services (CDSL) and they send alert messages, emails and notifications for transactions performed.
Yet, it is advisable to be vigilant of any securities transactions in your demat account.
It is a safe method to hold your securities as the risk of tampering, loss of physical shares, or forgery is prevented.

Can I open 2 Demat accounts?

Yes, it is legally possible to open more than one demat account per person. You can have multiple demat accounts in your name. But an investor can open only one demat account with a Depository Participant(DP) or a broker.
If you intend to have another demat account, you can open a demat account with another broker or a DP. An individual cannot have multiple demat accounts with the same stockbroker.

Why Demat Account is needed?

Demat Account is needed to hold the securities (shares, bonds, mutual funds, etc.) in electronic mode. Demat Account is a pre-requisite for equity delivery trading in India. Demat Account is also needed while applying for IPO (Initial Public Offering) as the allotted shares are credited to Demat Account.

Disclaimer: Investments in securities market are subject to market risk, read all the related documents carefully before investing. Visit our website for other Terms & Conditions.

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