What is a Demat Account?

A Demat Account, often known as a dematerialized account, is a one of the prerequisites for trading in securities. It is an account used to hold shares and securities that have been bought or dematerialized, thus facilitating online trading. You can hold several securities, like stocks, ETFs, bonds, and mutual funds in your Demat account.

What is dematerialization?

Dematerialization is the process of moving a stock certificate or holding papers from the physical form to an electronic form. Dematerialization is a more accurate form of maintaining records.

Importance of Demat Account

• A Demat account prevents the loss of documents and speeds up the entire process of buying and selling stocks.
• Demat account simplifies the entire investment journey for an investor and helps them track all their diversified investments at one place in one view.
• It helps investors to participate in an upcoming IPO in an easy and simplified way.

How does a Demat account work?

The objective of a Demat account is to store the shares. This is linked with a trading account that is used to buy and sell shares. The shares that you have bought will be then stored electronically in your Demat account.

When a 'buy' order is placed from a trading account, the exchange looks for a seller who wants to ‘sell’ similar quantity of the same stock. Once the exchange finds a match, it will then notify the respective clearing houses to complete the settlement process and the electronic delivery of the stocks bought in the ‘buyers’ Demat account.

Demat and Trading Accounts

Demat and Trading accounts are different things and investors should not confuse between them. A Demat account is used to store shares electronically, and a trading account is used for buying and selling shares. The objective of both may be different, however, today both Demat and Trading Accounts are offered together to customers to make the process of investing in stock market hassle-free.

Types of Demat account

Let us look at the various types of Demat Accounts:

1. Regular Demat Account:This is only for Indian citizens, who reside in India.
2. Repatriable Demat Account:This type of Demat account is for Non-Resident Indians (NRI). Once a customer becomes NRI, they need to close their regular Demat account and open a Non-Resident Ordinary (NRO) demat account along with Non-Resident External bank account, which is a must for Non-Resident Indians.
3. Non-Repatriable Demat Account:This is a Demat account for NRIs, however, the funds cannot be transferred abroad through this account. Users will also need a NRO bank account for this.

Open Demat and Trading Account Online

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