What is Demat Account
Dematerialised account or Demat account is an electronic account which holds securities and shares. People open Demat account to hold shares in electronic format in order to make online trading easier. While one trades online, the person can buy and hold shares in their Demat account. A Demat account holder keeps all their investments, Exchange Traded Funds (ETFs), government securities, non-convertible debentures (NCDs) in it. How it works is a share is converted into electronic form and is kept in the account. This is the dematerialisation process. It helps the investor to study their holdings constantly. Meanwhile, a Demat account makes trading shares easier. Normally, it takes 2 to 3 days to open a Demat account. A person can even borrow loan with a Demat account. By giving the securities in the account as collateral, the account holder can ask the bank for a loan.
Demat account is safe and easy at the same time. With Demat account, the risk of theft and loss or damage to shares is eliminated. Also, the transfer of securities is fast. The shares and securities enter the holder’s account when the trade is authorised. The shares are added to the account in case of a bonus, consolidation, and company merger. By logging in to the account, the holder can get complete knowledge. Three people can hold a Demat account together. However, one of them needs to be the main holder.
Benefits of Demat account-
It saves time
The Demat process is paperless and one can make the transaction easily. Hence, it saves a lot of time while one is trading.
Reduction in risks
When a shareholder trades online with Demat account, they risk of robbery or damage is taken out of the picture.
Cost-saving
Unlike other ways of trading, a Demat account holder doesn’t have to pay additional cost such as handling charges. Hence, trading becomes less expensive with Demat account.
It makes the process easier
A Demat account removes all the hassles from trading offline. One can make all the transaction online and ease the complete process. The holder can sell and buy holdings online without any additional work.
A holder can work with one account
With Demat account, one doesn’t need to open different accounts for tax-free bonds, NCDs, etc. With one account, a person can hold and track investments.
Fast transfer of shares
A Demat account saves a lot of time as the holder can transfer and receive shares online. Without having to go to the registrar or the company, the shareholder can transfer shares online.
Types of Demat account-
Regular Demat account
Regular Demat account is for the ones who live in India.
Repatriable Demat account
The funds of repatriable account go to Non-Resident External Account (NRE account). Repatriable funds can be transferred internationally.
Non-Repatriable Demat account
Non Resident Ordinary Account (NRO account) holds the funds received from non-repatriable Demat account. Funds made from non-repatriable account can’t be transferred internationally.
Funds from an NRE account can be transferred to an NRO account. However, they can’t be transferred from an NRO account to an NRE account.