what-is-demat-account

What is Demat Account / Meaning ? – A Safe Locker ?? Everything You Must Know!

The full form of Demat is Dematerialized Account. This account allows you to store financial products like Shares, Debentures, Bonds, and ETFs bought in the stock market electronically. 

Read the complete article to know everything about Demat Accounts.

Let’s get started!

Content:

Demat Meaning

The full form of Demat is Dematerialized Account. This account allows you to store financial products like Shares, Debentures, Bonds, and ETFs bought in the stock market electronically. Simply put, a Demat Account acts like a Bank Locker that stores your shares safely.

So Who provides a Demat Account?

NSDL and CDSL are the SEBI Registered entities that provide Demat Services to the Stock Brokers. Stock Brokers then provide investors access to Demat accounts.

NSDL and CDSL are technically known as depositories, and they do not just help in storing the Shares in Dematerialized Form but also other financial instruments such as:

  •  Debentures
  •  Bonds
  •  Exchange-traded Funds (ETFs)
  •  Mutual Funds
  •  Government Securities (GSecs) 
  •  Treasury Bills (T-bills), etc.

To know more about dematerialization, read our blog on Dematerialisation meaning. 

History of Demat Account

Back in the day, before the introduction of the Demat Account in 1996, if you bought shares in the stock market, physical share certificates would be delivered to your house. So, if anybody in your family holds physical shares and wishes to sell the shares, they need to first dematerialize the shares.

How to Dematerialize the Shares?

You need to follow the below steps to convert your shares into electronic form:

  • First, you need to open an account with Alice Blue.
  • Ask for Dematerialisation Request Form, fill it and submit it along with the share certificates.
  • Alice Blue will send the dematerialization request form to the CDSL (depository) and submit the share certificates to the registrar of the issuer company.
  • The registrar of the issuer company will validate the share certificates. Once approved, the registrar will inform the depository to credit the securities in your Demat Account. This whole process will take approximately 15-30 days.

Okay, so what is the use of the Demat Account? Why was it introduced? Read everything you need to know here.

Benefits of Demat Account

  • Shares will be easily delivered to your Demat account in just T+1 days after you buy them.
  • All the risks associated with physical shares, like loss of certificates, fake certificates, etc., are eliminated.
  • Physical share certificates attracted stamp duty, etc., which increased the transaction cost. But with the Demat account, complete paperwork has been eliminated.
  • Shares can be easily transferred with minimal effort.
  • You can access your Demat account anytime from anywhere with your Laptop, PC, or Mobile Phone. 
  • In a Demat Account, you can store Shares, Debentures, Bonds, Exchange-traded Funds (ETFs), Mutual Funds, etc.

Now that you know everything about Demat Accounts, you should get acquainted with the types of Demat Accounts.

Types of Demat Account

There are 4 types of Demat Accounts in India that can be chosen depending on your residential status, type, and volume of transactions.

  1. Regular Demat Account:  As the name suggests, it is an account that can be opened by any Indian resident who wants to deal in Equity, Mutual Funds, Bonds, ETFs, etc.
  1. Basic Service Demat Account: It is a Demat Account that is specifically designed for small investors who do not invest regularly in Stocks, Bonds, etc. A large number of investors in India do not invest regularly and end up paying maintenance fees, to avoid such fees, BSDA was introduced. 

The maintenance charges of BSDA depend on the holding value of the investor:

Holding ValueAnnual Maintenance Charges
Up to ₹ 50,000No AMC
₹ 50,000 to ₹ 200,000 ₹ 100
Over ₹ 200,000₹ 400+ GST
  1. Repatriable Demat Account: This Demat Account is for NRIs who wish to transfer the earnings from the Indian Stock Market to their abroad bank account. Here, the Demat Account is linked with the NRE Bank Account to easily transfer funds abroad.
  2. Non – Repatriable Demat Account: This Demat Account is for NRIs who do not wish to transfer the earnings from the Indian Stock Market to their abroad bank account. Here, the Demat Account is linked with an NRO Bank Account.

If you are interested in commodity trading, then read this article.

Demat Account Opening Procedure

If your Mobile no. is linked with Aadhar, you can open the Trading & Demat Account online. 

Follow the simple process given below:

  • First, visit our website and click on Open an Account.
  • Fill in your Name, Email, Mobile Number, and State, and click on Open an Account.
  • Upload account opening documents. 
  • Provide an IPV (In-person verification) by showing your PAN to the camera along with your face.
  • E-sign the documents by verifying your Aadhaar with your Mobile Number.
  • Your account will be activated within 24 hours.

Check out a detailed step-by-step process of account opening here.

Documents Required To Open An Account:

  • Identity Proof (PAN Card Mandatory)
  • Address Proof (Aadhar, Voter ID, Passport, etc.)
  • Passport Size Photo
  • Income Proof (Latest six months’ bank statement, Latest ITR copy, Three month’s salary slip)
  • Bank Proof (Cancelled Cheque, Passbook Copy or Bank Statement with visible Bank Account Number, MICR, and IFSC code)
  • Scanned copy of the signature (only in case of online account opening)

Once you open your account, we will provide you with a Trading Platform. Using this trading platform, you can buy and sell shares. 

Learn how to buy shares online. 

Open your account in 15 minutes now!

Why should you open an account with Alice Blue?

There are two types of brokers, a discount broker and a full-service broker. 

A discount broker provides you with trading and investing services at the lowest possible cost, and a full-service broker provides full-blown services like investing tips, hand-holding, trading reports, etc., but all these services come with a higher cost.

Well, Alice Blue is an exception! We provide the services of a full-service broker but at the cost of a discount broker. This means we charge the lowest brokerage yet provide full-blown services like a full-service broker. 

We hope that you are clear about the topic. But there is more to learn and explore when it comes to the stock market, and hence we bring you the important topics and areas that you should know:

Market What is Primary Market?
Difference between IPO and FPO
What is Secondary Market?
What is Bond Market?
Bull vs Bear Market
Trading What is Online Trading?
Difference between Futures and Options
What is Options Trading?
What is Commodity Trading?
What is Algo Trading?
Investment What is Bonus Share?
What is Valuation of Shares?
What is Corporate Action?
Analysis Stock Market Analysis
Individual Topics Stoploss Order
What are CTT & STT Charges?
India Vix
Difference between FDI and FII
Account What is Trading Account
Difference Between Demat and Trading Account

Quick Summary

  • A Demat account allows you to store financial products like Shares, Debentures, Bonds, ETFs bought in the stock market electronically.
  • There are many benefits of having a Demat account, of which one is – your shares will be easily delivered to your Demat account in just 1 days after you buy them.
  • The types of Demat account- 
    • Regular Demat Account, 
    • Basic Service Demat Account, 
    • Repatriable Demat Account and 
    • Non – Repatriable Demat Account
  • If your Mobile no. is linked with Aadhar, you can open the Trading & Demat Account online. 
  • Read the complete procedure for opening a Demat account online in the above article. Also know about why Alice Blue is could be the best stock broker for you.

FAQ (Frequently Asked Questions)

1. What Is Demat Account And What Is The Use Of It?

Demat Account acts like a Bank Locker that stores your shares safely, it allows you to store financial products like Shares, Debentures, Bonds, ETFs bought in the stock market electronically. 

2. Can I have 2 Demat Accounts?

You may have 2 or more Demat Accounts, but not with the same Depository Partner(DP) or Stock Broker. If you wish to have 2 Demat Accounts with the same DP, you will have to do it with a different set of account holders. Also, you need to link your PAN Card with all the Demat Accounts you own. 

3. What if I don’t pay the Annual Maintenance Charge? 

If the balance is available in Trading account, the AMC will get deducted automatically from the Ledger. 

4. Is it safe to share your demat account number?

Never share your demat account number with anyone, including your DP. Make sure that your e-mail address and mobile number are updated with the Depository Participant (DP) regularly.

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