In order to invest in the Indian stock market, it is mandatory to open a demat account. In fact, trading and investing in shares or securities is possible only through the demat account.
The introduction of demat account has proved to be beneficial for the investors and traders. They are no longer required to hold shares in physical form. Moreover, transacting through the demat account is safe and secure. In this article, you will learn about demat account meaning and other aspects related to it.
Let us first understand what is demat account.
What is demat account?
Demat account or dematerialised account holds your shares and securities in an electronic format. When online share trading is done, the buying and selling of shares are done through the demat account. A demat account holds all your investments at a single place. The various investments that this account holds includes investment in shares, exchange-traded funds, mutual funds, bonds and government securities.
After understanding demat account meaning, you must know the meaning of dematerialisation, as this term is frequently used along with the demat account.
Meaning of Dematerialisation
An investor who holds shares and securities in physical form can convert them into electronic form through the process of dematerialisation. Dematerialisation ensures that you can access your investments from anywhere across the globe and it is very easy to maintain. Demat account is also called dematerialised account for holding the shares and securities in electronic form. For online trading you need a demat account which can be opened with a Depositary Participant (DP). With demat or dematerialised account not only you can hold your securities electronically but also track and monitor their performance without any hassle.
Let us now learn about the facilities that are offered by a demat account
Facilities Offered By Demat Account
- Dematerialisation and Rematerialisation
Dematerialisation is the most important facility offered by a demat account. It converts all your physical holding of shares and securities that are in the form of certificates into electronic form. In addition, if you want your holdings to be converted into physical form, you can also do that through the demat account.
- Easy Accessibility
Demat account can be accessed using various media. Since all transactions are done electronically, all you need is an internet connection and computer or laptop or mobile phone to log into the demat account. It allows you to trade, invest or track the performance of your portfolio from anywhere.
- Corporate Benefits
Demat account helps you in availing the various corporate benefits like interests, dividends, refunds, etc. All the benefits get updated to your demat account automatically. Moreover, when there is a corporate action like stock split, bonus issue, right issue, etc., the demat account updates all these benefits into your account.
- Transfer of Shares
With the help of Delivery Instruction Slip (DIS) you can transfer the shares from one demat account to another. This slip provides all the necessary details of the transaction which helps in its smooth completion.
- Loan Facility
You can use the securities held in your demat account to avail loan from the lenders. By pledging the securities as collateral, you can avail a loan from the various lenders in the market.
- Freezing Account
If you want to avoid any unpredicted debit or credit transaction in your demat account, you can do so by freezing your account. You can freeze your demat account for a specific period depending upon your requirement. However, you must hold certain quantity of shares or securities in the demat account to avail that facility.
The above mentioned points prove that a demat account is very fruitful for the traders and investors in the Indian stock market. It assures safety of your shares and securities. Moreover, it is the easiest and convenient way to hold all your investments. If you are looking to open a demat account, you may consider opening it with Kotak Securities. Kotak Securities is a leading broking firm in India and provides the best services to its clients.