Demat account is an account in which the shares and securities are held in dematerialized form i.e. electronically without any physical papers held.
It is not like your savings or current account in which the cash is held and cards are issued.
For getting a demat account open, one needs to go to one of the Depository Participants or DPs. DPs could be banks, brokers or financial institution that have been allowed to provide this service. The Dps act as intermediary between central depository and the investor.
Some facts about Demat Account:
- To carry out transactions in the stock market, one should get open a demat account.
- To open a demat account, KYC procedure is also followed.
- Multiple demat accounts can be opened.
- Demat accounts are held by a single person i.e. no joint accounts can be operated.
- There is no need of any minimum balance in demat account.
- Access to the Dematerialized account requires an internet password and a transaction password.
- Demat accounts are maintained by NSDL(National Securities Depository Limited) and CDSL(Central Depository Services Limited) and the banks act as intermediary. It acts as an intermediary between the depository and investor.
Benefits of having Demat Account:
- When the transactions are done, like buying or selling securities in the market, they get automatically updated.
- It provides paperless transactions.
- It provides security in holding securities in the account.
- Provides reduction in transaction cost.
- No stamp duty on transfer of securities.
- Traders can work from anywhere