What Is Demat Account: Meaning, Types, and Benefits

A Demat account, also known as dematerialisation, is a digitalised way to store securities in an electronic form. It encompasses online trading in shares, bonds, futures, options, ETFs, mutual funds, and other securities nationwide. Investors can use a demat account to create and manage their portfolio seamlessly from anywhere in the world. Eliminating the need for physical paper certificates, dematerialisation has become an efficient trade method. But most people still need clarification on what is a demat account? Let’s dive deeper. 

Demat Account Meaning

A Demat account is a digital vault that allows investors to buy, sell, and hold securities conveniently. It made stock market investments transparent and simple for investors struggling due to physical trading systems. The major role of demat accounts is to bring a drastic change in the trading mode. 

The SEBI (Securities and Exchange Board of India) introduced demat accounts in India in 1996 under the administration of two depositories. These include the National Securities Depository Ltd. and the Central Depository Services Ltd. These depository institutions provide demat account services in India with the help of intermediaries. These intermediaries could be the stockbrokers or DP (Depository Participants). Intermediaries offer these services and charge specific fees based on different factors such as agreements, subscriptions, and trading volume. 

We can not know the demat account meaning in such short phrases. There is much more to know about this. It should be noted that demat accounts and trading accounts are different. Demat accounts can be used to hold securities electronically, whereas a trading account helps investors place transactions in the stock market. Stockbrokers registered with the stock exchanges can provide trading account services to investors.

What is Dematerialisation?

Dematerialisation, in short, demat accounts, provides easy access to investment portfolios by converting physical paper certificates into digital form. The Prime Minister, Shri Narendra Modi, goal to make India a digital economy through the “Digital India Scheme of 2015” contributed most to dematerialisation through faster settlements, reduced errors, and easy liquidity in the stock market. 

The advent of demat accounts allowed investors to seamlessly manage and alter their portfolios from anywhere in the world. To convert your physical paper certificates/shares into electronic form, register for a demat account opening with an intermediary. 

Importance of Demat Account

Demat account opening is essential in different ways. Let’s explore how.

• Offer seamless investment journey to investors. 
• Eliminate the fear of document theft, tampered, damage, and loss.
• Foster quick onboarding and easy transfer of shares.
• Provide knowledgeable insights and access to apply for upcoming IPOs. 
• One-stop-shop to simplify investing and monitor portfolios.  
• Accessible through multiple devices like smartphones, tablets, or desktops. 

Features of Demat Account

Demat accounts in India come with numerous features to encompass investors’ interests and seamless trading experience. Let’s delve deeper into them. 

• Transfer of Shares: Dematerialisation has made the transfer of shares convenient and efficient. Investors just have to give their instructions for transferring shares.   

• Easy Accessibility: With the help of quick and easy access to holdings or investment portfolios, one can generate returns from the stock market. 

• Liquidity in Trades: The convenience of using demat accounts to buy/sell securities influenced liquidity in stock market trade. It also helps investors get money easily by selling shares.

• Loans Collateral: Demat allows investors to use their securities as collateral to take loans from financial institutions. 

• Temporary Freeze: The investor can put the demat account on a temporary hold for a specific time. As a result, it will not allow the transfer of money from debit or credit cards into the account. 

• Dividends and Benefits: To receive dividends and other stock benefits, open demat account online. Other benefits might include bonus issues, public issues, and splits.  

• Different Access Points: Digital trading is possible in demat through different touch points. These include desktops, tablets, smartphones, laptops, etc. 

• Choose Nomination: As mapped by depositories, demat gives investors a nomination facility. They can add a nominee who will be entitled to receive all the account holdings.

Benefits of Demat Account

Conversion of physical share certificates into electronic form through a demat account offers investors multiple benefits. It also specifies why you need a demat account. These benefits include. 

• Low Trading Cost: Investors can open a demat account online for absolutely free. If you choose the best platform for this account, you will be charged with 0 AMC/brokerage. 

• Reduce Paperwork: Demat has eliminated the use of physical certificates to transfer shares. Now, investors can store their shares in electronic form to safeguard them against being lost, stolen, or tampered with. 

• Quick and Seamless Trade: The electronic trade method (Demat) eliminated the time-consuming practices of physical paper certificates. Open a demat account online to make your investment journey streamlined and time-saving. 

• Safe and Secure: SEBI, depositories, and intermediaries are focused on creating demat a safe, secure, and reliable way to trade in securities. It holds shares safely with no chance of forgery. 

• Multiple Touchpoints: Demat trading accounts come with several access points. Investors can access them through smartphones, tablets, PCs, etc. It also helps them track and alter portfolios remotely. 

• Easy Nomination Procedure: Appointing a nominee has become easy and flexible through the demat account. The nominee will be entitled to receive all the holdings in the case of the investor’s demise. 

Types of Demat Accounts

During demat account opening, it is essential to select the type of account an individual is registering for. Several demat account types sometimes confuse investors about which one to select. So, let’s explore them together. 

1. Regular Demat Account

Individual residents of India are eligible to buy, sell, and hold securities through a regular demat account. Investors can open it for private investment through an intermediary. Regular demat account enables access to stocks, mutual funds, futures, options, ETFs (Exchange-Traded-Funds), etc. 

2. Repatriable Demat Account

Typically designed for NRIs (Non-Residents of India) willing to invest in the Indian stock market. They can create and manage investment portfolios of permissible securities like stocks, mutual funds, etc., through repatriable demat account opening. This account allows the transfer of funds to a foreign bank account. 

3. Non-Repatriable Demat Account

Another type of demat accounts for NRIs to trade in permissible securities. Non-repatriable demat accounts do not allow investors to transfer funds into a foreign bank account. The fund would remain in India and can not be withdrawn in foreign currency. 

4. Basic Services Demat Account

Those who invest occasionally and opt to open a demat account online with low AMC (Annual Maintenance Charges) can get BSDA. It applies nominal AMC charges or fees for the holdings. 

Note: The selection of demat account types depends on the residency status and investors’ goals. 

How Does a Demat Account Work?

Apart from the features and benefits of having a demat account online, individuals need to understand how it works. It begins by placing an order and ends with transferring funds; demat accounts involve multiple processes.  

Once the order is placed, stock exchanges will process the order and transfer the shares into investors’ portfolios. After execution of the order, shares will be transferred to demat by the end of T+1 days. Moreover, while the selling order is placed, shares will be debited from the demat account, and money will be transferred. 

As discussed above, NSDL and CDSL provide demat account services through intermediaries. Such depositories and intermediaries need to be registered with SEBI.  Also, the integration of demat and trading accounts encourages seamless transfer of shares and money through dematerialisation. 

How to Open a Demat Account Online?

Demat account opening is not as difficult as it looks to be. It’s just a matter of some crucial steps. Follow the below steps to open a demat account online with a registered broker or depository participant. 

• Step 1: Select the intermediary through which you want to open a demat account. Choose the trusted and recognised platform to get a seamless trading experience. 

• Step 2: Register with your email address or phone number to proceed with the further application process. 

• Step 3: Complete the form to open a demat account online, providing the required contact details and information. Accurate details will make this process easier. 

• Step 4: Provide and verify the necessary documents, such as a PAN card, address proof, bank account, and a passport-size photograph. 

• Step 5: Sign the agreement between you and the intermediary. This process requires you to sign electronically, which is the easiest way to proceed with demat account opening.

• Step 6: Receive your login credentials via text message and email. These details will help you access your demat account online. 

Demat Account Details

Investors need to get some details from intermediaries for their demat account.

1. Login ID: When you open a demat account online, you will receive a login ID via text message and email. It will help you access your account anywhere in the world. 

2. DP ID: It is the ID assigned to depository participants as part of the demat account number.  

3. POA Number: POA stands for Power of Attorney. You will give the stockbroker the consent to manage your account as per the agreed terms and conditions.

4. Beneficiary ID: It is the demat account number of 16 characters issued under CDSL (Central Depository Services Ltd). 

Demat Account Charges 

It depends on the intermediary to charge for the demat account. Some stockbrokers or depositories are free to open a demat account online. However, some charges could be imposed on the investors’ demat accounts. Explore with us. 

• AMC: It stands for annual maintenance charges intermediary levies on demat accounts. They need to follow the guidelines for charging AMC from investors. 

• Transaction Charges: These are the percentage value of shares investors trade from the demat account. They also include credit charges, taxes, CESS, and rejected instruction charges. 

• Custodian Fees: These are the one-time fees that intermediaries can charge annually from investors. Custodian fees are to be paid to depositories like NSDL and CDSL.

• Pledging Charges: Investors incur charges when they pledge shares or securities against the loan. The charges range from Rs 50 to Rs 100 and vary from broker to broker.  

Why Choose the Univest Demat Account?

Univest allows investors to open a demat account online like other intermediaries and have a seamless trading experience. There are several reasons to choose Univest as the best platform for demat account opening.

• Quick Onboarding
• Easy to Access 
• Zero Account Opening Fee
• Zero Brokerage
• Seamless User Interface
• SEBI-Registered Analysts to Recommend Stocks

Note: Visit the official website and initiate your seamless investment journey with Univest now!

Required Documents

To open a demat account online, you need to provide some documents to the depository participants or stockbrokers. 

• PAN Card
• E-Sign (On white paper)
• Address Proof
• Income Proof
• Passport Size Photograph
• Cancelled Cheque
• Bank Details

Let’s Wrap on Demat Account

Nowadays, demat accounts have provided investors with major control over their fingertips. It made the trading experience quick and seamless. To open a demat account online, it is essential to consider some steps. And one can begin by choosing a stockbroker or depository participant. Univest has a plus point with its demat account services for providing stock recommendations. It is also recognised as the one-stop stock market app that executes trade instantly. Open a demat account online and initiate your seamless journey with Univest today. 

Key Phrases

• Dematerialisation: Abbreviated as Demat, a process of trading in securities by converting them into electronic form. 

• ETF: Exchange-Traded-Fund is a group of securities like stocks, bonds, and more. ETFs have regained popularity by allowing investors to diversify their portfolios. 

• Portfolio: A set of securities the investors hold to generate returns in the coming years. 

• NSDL: NSDL stands for National Securities Depository Ltd., which was established in 1966. NSDL provides demat account services in India and manages around 3.7 crore demat accounts.   

• CDSL: CDSL stands for Central Depository Services Ltd. and enables demat account opening and management. As of now, CDSL manages around 13.3 crore demat accounts in India.    

• Depository Participants: DPs are the agents who help investors open a demat account online and are registered with SEBI (Securities and Exchange Board of India). 

• IPO: IPO stands for initial public offering. It is the event in which a private company sell its shares to become a publicly listed company on the stock exchanges. 

FAQs on Demat Account

1. What is a demat account

Ans. Demat account is an electronic method for investors to buy, sell, and remotely hold securities. These securities include shares, ETFs, bonds, mutual funds, futures and options. Individuals can open a demat account online through an intermediary/depository participant to invest seamlessly in Indian securities. 

2. What are the charges for demat accounts?

Ans. Intermediaries charge a nominal fee from investors. Some demat charges include AMC, transaction fees, custodian fees, and account opening charges. 

3. Can we open a joint demat account?

Ans. Opening a joint account makes it possible to trade seamlessly. Intermediary allows a maximum of three account holders at a time. It includes one primary account holder and two joint account holders.  

4. What are the benefits of a demat account?

Ans. Demat can convert physical share certificates in electronic form to eliminate the fear of document theft, loss, or tampered. It also provides investors with easy accessibility and quick onboarding to create and alter the portfolio at their fingertips. Moreover, demat accounts come with multiple touchpoints, like smartphones, tablets, PCs, etc. 

5. What are the types of demat accounts?

Ans. Different demat account types include regular, repatriable, non-repatriable, and BSDA (Basic Services Demat Account). Repatriable and non-repatriable accounts are only for the NRIs (Non-Residents of India). However, Indian residents use a regular demat account to trade in stocks, bonds, ETFs, and mutual funds. 

6. How do I withdraw money from the demat account?

Ans. To transfer your money to the bank account, request a withdrawal on the trading platform or contact customer support for any query. Enter the amount you wish to withdraw from the demat account. 

7. Is a demat account compulsory to apply for an IPO?

Ans. Demat account allow swift and seamless application for an IPO (Initial Public Offerings). But it is not a compulsion. Investors can also apply and get shares in physical form. Shares received in the demat account against IPO can only be tradable online. 

8. Can I open two demat accounts?

Ans. Investors can open two or more accounts simultaneously. However, they should consider that it would levy more AMCs on them. It should also be noted that investors can open only one demat trading account with a stockbroker.