What is Demat Account: Definition, Types & Benefits

Learn about the benefits of having a Demat account and why you should have (own) one.
What is Demat Account: Definition, Types & Benefits
3 mins
22 August 2023

Key takeaways

  • A Demat Account holds information about the shares and securities you own.
  • It keeps your investments in digital form, eliminating the need for paper documents.
  • This makes it easy for you to check and manage your stocks online, providing great convenience.

What is Demat account?

A Demat account helps investors hold shares and securities in an electronic format. It is also commonly known as a Dematerialised account. This account helps keep track of an investor’s holdings in shares, exchange-traded funds, bonds, and mutual funds in one place.

Importance of a Demat account

  1. Digitally secure way of holding shares and securities.
  2. Eliminates theft, forgery, loss, and damage to the physical certificates.
  3. Quick transfer of shares.
  4. It eliminates unnecessary paperwork.
  5. Online opening of Demat account is simpler and faster.
  6. It eases and streamlines the process of share trading.

What is Dematerialisation (Demat)?

Dematerialisation is the process of converting the physical share certificates into electronic form, making it easy to maintain and access them from anywhere. Earlier, shares were held in the form of physical certificates, which were cumbersome to store and transfer. The advent of a Demat account made it a lot easier to handle shares. An investor who wants to convert his physical shares into digital form needs to open a Demat account with a depository participant (DP).

Features of Demat account

A Demat account is an important tool for safekeeping shares. Demat accounts eases the process of share trading and makes it quicker as well. Initially, shares were held in a physical form via share certificates. That made the entire procedure tedious and time consuming. To eliminate such limitations, the National Securities Depository Limited (NSDL) was established in 1996. They brought the concept of Demat accounts that enabled electronic storage of shares and securities of companies. In India, if you want to invest in the stock market, it is compulsory to open a Demat account.

Benefits of a Demat account

  • No paper worries:
    Before the advent of the Demat account, 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 a Demat account, you can store all these shares electronically in a safe and secure digital repository.

  • Easy storage & transfer:
    This allows you to store any number of shares, so you can trade in volumes and monitor the details of all the shares you hold in a Demat account. It further facilitates the swift transfer of shares while trading online.

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

  • All-in-one storage for your investments:
    Besides the shares, the Demat account can also hold multiple assets, 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.

  • Nominate with ease:
    A Demat account also provides the nomination facility as per the process described by the depository. In case of the investor’s demise, the appointed nominee will receive the shareholding in the Demat account.

How does a Demat Account work?

Demat accounts are primarily used to hold the bought shares.

  • In case you want to buy or sell a specific share, you need to login to your Demat and trading account, which is also linked to your bank account
  • When a ‘buy’, or ‘sell’ request is placed in a trading account, the Depository Participant, forwards this to the stock exchange on an immediate basis
  • Suppose the order is to ‘buy’, the stock exchange then searches a seller who wants to sell shares and if price matches, it is sent to clearance houses to debit those many shares from the seller’s Demat Account and credit them to the buyer’s Demat Account
  • Please note, the buyer and the seller may hold Demat Accounts with Depository Participants belonging to different depositories

Types of Demat account

In India, there are three major types of Demat accounts offered by Depository Participants.

  • Regular Demat accounts
    These are meant for Indian residents. If you are dealing with investment and equity trading, a regular Demat Account is the best option for you. Here the charges are dependent on the type subscribed, volume that is there in the account and the various terms and conditions set by the depository and the DP (Depository Participant).
  • Repatriable Demat account
    This kind of Demat Account is good for NRIs, who wishes to invest in the Indian Stock Market quickly from any part of the world. Such an account is useful for NRIs as with the help of such an account, they can transfer their funds to various foreign countries. But NRIs looking to hold a Repatriable Demat Account need to possess an associated NRE bank account.
  • Non-repatriable Demat account
    This is similar to a repatriable Demat Account and is also for NRIs. However, this account doesn’t allow you to transfer funds abroad. This requires you to link it to a Non-resident Ordinary (NRO) bank account.

Documents required for Demat account opening

To open a Demat Account without any hassle, you should have some essential documents. Listed below are the documents that’s required to open a Demat account with Bajaj Financial Securities Limited.

  • PAN card
  • Proof of address (Aadhar card, driving license, passport)
  • Photograph
  • Signature on white paper
  • Income proof, for activation of futures and options segment

How to use a Demat account?

Using a Demat account is simple. Your Demat account gets linked with your open trading account online, which in turn gets 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 gets executed, the shares will get transferred to your demat account by the end of T+1 days, where T is the day the order got executed. Since both demat and trading account are 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.

Why open a Demat account with BFSL

  • First and foremost, Demat account opening is free of cost with Bajaj Financial Securities Limited through the Freedom Subscription Pack.
  • Process is 100% online
  • BFSL offers low brokerage rates with multiple and unique offerings
  • You can securely access your account on your mobile or desktop from anywhere in the world


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Standard Disclaimer

Investments in the securities market are subject to market risk, read all related documents carefully before investing.

Research Disclaimer

Broking services offered by Bajaj Financial Securities Limited (BFSL) | Registered Office: Bajaj Auto Limited Complex , Mumbai –Pune Road Akurdi Pune 411035 | Corporate Office: Bajaj Financial Securities Ltd,1st Floor, Mantri IT Park, Tower B, Unit No 9 & 10, Viman Nagar, Pune, Maharashtra 411014 | CIN: U67120PN2010PLC136026 | SEBI Registration No.: INZ000218931 | BSE Cash/F&O (Member ID: 6706) | DP registration No : IN-DP-418-2019 | CDSL DP No.: 12088600 | NSDL DP No. IN304300 | AMFI Registration No.: ARN – 163403 |

Research Services are offered by Bajaj Financial Securities Limited (BFSL) as Research Analyst under SEBI Regn: INH000010043. Kindly refer to www.bajajfinservsecurities.in for detailed disclaimer and risk factors

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Investment in the securities involves risks, investor should consult his own advisors/consultant to determine the merits and risks of investment.

Frequently asked questions

What is a Demat account and how it works?

Demat or Dematerialised Account is used to hold shares and securities in electronic format. It simplifies the process of holding investments such as shares, mutual funds, government securities, bonds etc.

Is Demat account free?

A Demat account with BFSL has zero account opening charges. However, subscription charges and brokerage charges are applicable depending on the subscription plan chosen by the investor. Click here to learn more about the three different subscription plans offered by BFSL.

Can we buy shares without Demat account?

No, shares cannot be bought without a Demat account. One must have a Demat account with a Depository Participant (DP) for buying and holding shares in India.

What are the disadvantages of a Demat account?

The disadvantages of a Demat account include:

  • Maintenance fees and transaction charges can accumulate.
  • Vulnerability to cyber threats.
  • Some individuals may struggle with the digital format.
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