Different Types of Demat Account

A Demat account is a type of repository for your shareholdings, primarily used to electronically hold shares, bonds, securities, ETFs, etc. It eliminates the hassles of owning and storing a physical copy of investments. The Securities and Exchanges Board of India (SEBI) mandates stock market investors to have a Demat account to invest. Indirect investments, such as purchasing a mutual fund, can be done without a Demat account; however, no direct investments can be made without it. Different types of Demat accounts are available in the market, and investors can select their preferred account according to their requirements.

The types of Demat Accounts

Let us look at the types of Demat accounts.

1. Regular Demat account:

   Indian residents can open regular Demat accounts. It carries out the basic activities of a Demat account, i.e., holding the investments in a Dematerialized electronic format. The account holders can use a regular Demat account for their investment activities in equity shares. A trading account and a regular Demat account are required to carry out investments in Futures and Options. A regular Demat account comes with annual maintenance charges (AMC). The SEBI introduced a Basic Services Demat Account (BSDA) that eliminates or minimizes the AMC depending upon the investment size. This feature was introduced to help small-time investors who pay high AMC despite minimal holdings. BSDA was introduced to induce more participation from smaller investors.

2. Repatriable Demat Account:

   These accounts are designed specifically for NRI (Non-resident Indian) investors. It allows them to invest in the Indian stock markets and facilitates the transfer of funds outside India. Repatriable Demat account holders require NRE (non-resident external) accounts to be linked to the Demat accounts. It then allows for a maximum repatriation of up to one million US dollars annually.

3. Non-repatriable Demat account:

   The non-repatriable account is also designed for NRIs. However, it does not allow for transferring funds outside India. The non-repatriable accounts are linked to an NRO (Non-resident ordinary) Demat account.

Conclusion

A Demat account is a type of savings account that contains your securities instead of money. Investing in Indian stock markets requires a Demat Account, and the investors have the option to select from different types of Demat accounts. Residents of India can opt for a Regular Demat account which is relatively simple to procure from any Depository Participant. On the other hand, NRI investors have to comply with the rules of the Foreign Exchange Management Act (FEMA) and can hold a Repatriable or Non-Repatriable Demat account, depending upon their requirements.

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