If you are just dipping your feet in the world of trading, there is a lot you need to learn. You may have heard of Demat account. However, what is this and what makes it so important in the current world? Statistics show that in the year 2024, it was observed that over 46 million fresh Demat accounts were created which is over four times the number of accounts in the year 2019.
A demat portfolio, which stands for “dematerialized account,” is an electronic account that keeps your equities, bonds, mutual funds, ETFs, and government assets in digital form. You may think of it as a digital vault or bank account for your money. When you buy shares, they go into your account, and when you sell them, they come out.
What is Demat account?
Demat accounts, which were introduced by SEBI in 1996, replaced dangerous physical share certificates. They changed the way trading works in India through depositories like NSDL (1996) and CDSL (1999).
What You Need to Know About a Demat Account
- Easy Transfers: Use a Delivery Instruction Slip (DIS) to move shares.
- Collateral for Loans: Use securities as collateral to get loans without selling them.
- Freeze Option: Lock your account for a short time to keep it safe.
- Automatic Corporate Benefits: Get dividends, bonuses, stock splits, and interest added to your account automatically.
- Multi-Device Access: You can check your portfolio at any time using applications or the web.
- Quick Processing: Electronic instructions make transactions go faster.
Things Every Newbie Should Know
There are a lot of benefits to switching to Demat over old physical shares:
- You don’t have to worry about stealing, forging, damaging or stealing.
- There is no paper trading involved.
- Transfers do not need any form of stamp duty and there is less paperwork to complete.
- This method is more efficient and straightforward.
- You can also use your assets as margin or collaterals.
Different kinds of demat accounts
- Regular Demat Account: Best for Indian retail investors who live in India.
- Basic Services Demat Account (BSDA): A cheap choice for small portfolios (lower or no AMC if assets are below a certain level).
- Repatriable Demat (for NRIs): Lets you send money to other countries.
- Non-Repatriable Demat (for NRIs): Money stays in India.
There are special accounts for businesses and foreign investors.
How a Demat Account Works?
- Start with a Depository Participant (DP) like Kotak Securities.
- Dematerialize physical shares or buy new ones online.
- Trades happen through your linked trading account, and shares are automatically credited or debited.
- Check on the app or website; perks like dividends are credited automatically.
Demat is safe, quick, and affordable, whereas physical is more likely to have problems and take longer. Demat holds securities, while a trading account buys and sells them. For full trade, you need both! Are you ready to open your Demat account? With Kotak Securities, everything is done online, and it can be set up in five minutes with a Tez Account.