A demat account works like a depository for your stocks and other securities. The shares are held in a demat account in a dematerialised i.e. electronic form. As a result, holding and transferring them becomes faster and more convenient with the help of a demat account.
There are four types of demat account viz. regular demat account, BSDA (Basic Services Demat Account), repatriable, and non-repatriable demat account. The key differences between these types are highlighted below:
- A regular demat account is meant for Indian citizens. A BSDA is also a regular demat account but it offers basic services at zero maintenance cost if the value of your investments is below Rs. 50,000. A nominal AMC (Annual Maintenance Charges) is applicable for investments ranging from Rs. 50,000 to Rs. 2,00,000.
- Non-repatriable and repatriable demat accounts are meant for NRIs (Non Resident Indians) and PIO (Person of Indian Origin). The only difference between them is that a repatriable demat account allows the account holder to transfer the funds to a foreign account whereas the non-repatriable doesn’t.
- An NRE (Non-Resident External) account is required to open a repatriable demat account whereas an NRO (Non-Resident Ordinary) account is essential to open a non-repatriable account.
Can trading be done without a demat account?
A demat account is not required for intraday trades and trading in the Futures and Options segment. However, most other securities that involve the delivery of shares require a demat account. In fact, having a demat account is one of the requisites for trading smoothly in the financial securities of the stock market.
How to use a demat account?
If you don’t know how to open a demat account, you can visit the official website of a brokerage firm or bank that offers demat services and follow their instructions. It is possible to open a demat account through online platforms without any issues. Once you open a demat account, you can use it for the following purposes:
For buying/selling shares & other securities
A demat account stores the stocks and other securities that you buy from the stock exchange. However, you need a trading account to place the actual buy and sell orders. The trading account is linked to a bank account from where you can transfer the funds for buying shares.
For transferring shares
Shares can be transferred from one demat account to another. You need to fill a DIS (Delivery Instruction Slip) and provide the details of both the demat accounts to process the transfer seamlessly. It is also possible to transfer shares online these days with the help of facilities like Speed-e and Easiest which are offered by NSDL (National Securities Depository Limited) and CDSL (Central Depository Securities Limited) respectively. You need to register on their respective portals to avail these services.
Other main uses of demat account are highlighted below:
You can easily access your demat account via a mobile or laptop these days. As demat accounts are available online, you can use it from any corner of the world through the internet.
Can hold a variety of securities
A demat account can be used for holding shares, bonds, ETFs (Exchange Traded Funds), mutual funds, and government securities.
Facilitates easy tracking of investments
A demat account contains complete information about your investment portfolio. You can get insights regarding your asset allocation, diversified holdings, and other details by the various tools that are offered by demat account providers these days. Also, tracking all the transactions is possible by downloading detailed account statements.
Makes online trading faster & smoother
As shares and other securities are stored in a digital form in a demat account, trading them becomes easier and more convenient. It also saves time as buying, selling, and transferring shares can be done in seconds with the help of your demat and trading accounts.
Reduces the costs like stamp duty
As the demat account facilitates paperless transactions, there is no need for paperwork. Therefore, there is no need to pay the stamp duty required for documentation purposes. Similarly, it also reduces costs associated with storage and maintenance of securities.
Updates regarding upcoming IPOs
Information about the upcoming IPOs like the company name, bid price, bidding date, lot size, etc. can be accessed from a demat account.
Corporate benefits get credited directly
When the companies issue bonus, rights issues, dividends, stock splits, and other corporate benefits, they get directly credited to your demat account.