The electronic mode of trading has brought an investing revolution. The traders, companies and exchanges used physical certificates of shares. The company’s used to issue physical shares to their shareholders. But this system had a lot of flaws such as theft, forgery, sign mismatch, and many more.
Therefore, the Government of India, along with regulatory bodies, decided to convert the entire system into a digital format. The conversion of those physical shares into digital or electronic form is referred as dematerialization of shares. Then these converted shares are stored in a demat account. A demat account also helps in transferring shares quickly.
Let us now understand the demat account meaning in detail:
Demat Account Meaning
A demat account is an electronic storage space for all kinds of financial instruments. It can store all the securities including, equity shares, bonds, foreign currencies, and commodities, in an electronic format.
When you place a buy order from the demat account, the transaction value is debited from your bank account, and the securities are credited into the demat account. Alternatively, when you place a sell order, your demat account gets debited with the same number of shares. The proceeds from the sale of those securities are credited to the registered bank savings/current account.
People who are new to stock market have always one common question- “how to open a Demat account?”.
Follow these steps to open a Demat account offline.
- Firstly, you need to connect with a registered and reputed broker. A good broker provides more services and charges minimum fees. To find a reputed stockbroker as per your budget, you may require performing enough research. Your first preference should be the broker, which has a branch near your home or office.
- Secondly, the broker will then hand over the demat account form to you. Fill in the form correctly with accurate information and submit it along with the requisite documents to the broker. The list of documents is attached with the account opening form.
- Thirdly, the account opening form is sent for verification to the backend. After the successful verification, the applicant will receive a confirmation mail. Make sure you register your active email ID with your broker.
- Lastly, the log-in credentials of the demat account are sent to the demat account holder. Post which, they are ready to trade in the stock markets.
To avoid any physical visit to the broker, you can apply online to set a best Demat account in India along with a trading account. Just visit the official portal of the broker and submit the online application and wait for document verification. After a few minutes, you will have your account credentials.
Types Of Demat Accounts
Mainly, the following are three types of demat accounts available for Indian and NRI investors:
Regular Demat Account
A regular demat account is a normal account that is used to hold and transfer financial securities. It helps in making operation easier for the account holder. The regular demat account holds financial securities in an electronic format thus, eliminating the risk of theft, forgery, and damage.
Repatriable Demat Account
If an NRI investor is looking for investments in the Indian stock market, they have a repatriable demat account. This account helps NRI to make stress-free investments into the financial markets. Moreover, it allows the fund transfer to and from foreign countries. It allows currency transfer.
Non-Repatriable Demat Account
It is associated with the NRO account. Similar to an NRO account, the non-repatriable demat account holder cannot transfer funds abroad using it. The NRO account only manages the money which is earned in the Indian currency. That is, it does not allow currency conversion.
The broker does not provide anything for free. They take various charges such as demat transaction charges, account opening charges, and many more. Therefore, research well before choosing the broker.