Demat Account - Meaning, Types, Benefits, How to Open Demat Account Online

What is a Demat Account?

A demat account is an account which allows the investors to hold shares or securities in an electronic form. The shares purchased get credited into a demat account and similarly at the time of selling, the securities are debited from the account. This account is used to hold a spectrum of investments such as shares, ETFs, mutual funds, bonds, government bonds, etc.

Procedure of dematerialisation of shares was launched in 1996 to make judicial use of electronic trades. Dematerialised or demat account helps in holding shares in electronic mode and helps people to purchase shares and collect proceeds in case of sales in a secure way.

Types of Demat Account:

There are three different categories of demat account which are mentioned below:

1. Regular Demat Account

Regular Demat Account is a type of demat account which is suitable for those investors or traders who are Indian residents. 

2. Repatriable Demat Account

Repatriable Demat Account is a type of demat account which is suitable for those investors or traders who are Non-Resident Indians (NRIs). This type of demat account allows transferring capital overseas. However, there is a requirement of Non-Resident External (NRE) back account.

3. Non-Repatriable Demat Account

Non-Repatriable Demat Account is a type of demat account that again is suitable for Non-Resident Indians (NRIs) but transfer of wealth abroad cannot take place. There is a requirement of a Non-Resident Ordinary (NRO) bank account to be associated with this kind of demat account.

Benefits of Demat Account:

There are many benefits of demat account which are mentioned below:

1. Ease of accessibility

Demat Accounts provide easy accessibility of the investments and transaction statements via net banking. The details of transactions & investments can be easily tracked through a demat account

2. Simpler dematerialization of securities

Certificates in physical form can be easily converted into electronic form and vice versa on requests to the depository participant (DP). 

3. Lower risks

Holding of securities in physical form is prone to the risks of thefts, or losses. But these risks are completely dismissed through a demat account which lets an investor store the securities in electronic form.

4. Ease in transfer of shares

Transfer of shares on trades have also become a much simpler process through a Demat account as some of the costs incurred in physical securities like stamp duty and other charges have been eliminated. Overall costs & time taken for transfers to the investor’s account have also reduced.

5. Liquidity of shares

Liquidation or selling of shares has become a very simple & quick process via Demat accounts.

6. Loan against securities

A Demat account holder can easily avail loans against the securities held in the account. In other words, the securities in a demat account can be used as collateral for getting loans. 

7. Globalization aspect

Demat accounts play an important role in providing global investors a simpler access to the Indian stock markets. And hence, helps to receive foreign investments in the country.

How to open a Demat account online?

Opening a Demat account is a very simple and hassle-free process. The steps to open an account are mentioned below:

1. Select a Depository Participant (DP).

2. Fill account opening form with necessary details and submit the necessary documents along with it. A PAN card is mandatory to open a Demat account.

3. After submitting the form, copy of rules and regulations, terms of agreement, charges will be provided by the depository participant.

4. In-person verification is also mandated and hence, a member of DP official staff will have to contact the individual to verify the details provided in the account opening form. 

5. After verification, the member of the DP staff will give an account number or client ID. These details can be checked online as well.

6. A yearly maintenance fee is also charged for the Demat account which covers account transaction charges. These charges are applicable as per the structure laid down by the DP.

Demat Account FAQs

1. How many types of Demat accounts exist?

There are three types of Demat accounts. Regular demat account, repatriable demat account and non-repatriable demat account.

2. Can a loan be availed via Demat account?

Demat account holders can easily avail loans against securities held in their account.

3. What is the minimum balance of securities required in demat account?

There is no prescribed minimum balance of securities required in demat account.

4. What is a DP?

DP stands for Depository Participants that acts as a mediator between the depositories such as NSDL and CDSL. Similar to a bank, traders can get their Demat account opened with a DP along with other facilities that facilitates them to invest or trade.

5. Is part dematerialization allowed?

Yes, investors can completely or partly dematerialize their holdings.

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