What is a Demat Account: Basics, Types & Benefits

Personal Finance

As the world is advancing, trading is becoming more popular. Now with Demat accounts, you can simplify trading to monitor your holdings effortlessly.

For starters, opening a Demat account is key to ease of investment. Also, this keeps you updated on the current state of your portfolio.

Now, you might be curious about what a Demat account is.

It’s also possible that you are somewhat aware. Still, you might further wonder what it has to offer. Or maybe, you want to know how the entire system works.

In that case, you will be pleased to know you’re in the place! So, let’s dive in, shall we?

Demat Account Meaning: The Fundamentals

The question of the hour is, “Why the Demat account?”

You need not scratch your head, allow us to walk you through this!

For the record, a Demat account helps you store your investments in electronic form. Like a regular bank account, a Demat account holds your assets digitally. So, in a way, it eliminates the risk of owning any physical certificates. 

In turn, a Demat account gives stock trading a digital edge. So, you can now keep track of your investment profile on the go. Furthermore, you can access and transfer shares at your convenience.

If you were clueless about the Demat account meaning before, now you can get started with ease! If you’re currently holding shares physically, you must first transfer them into the digital form. Then, you can add them to your Demat account.

How does a Demat account work?

Online trading requires you to link your Demat account to your trading account. Also, remember to link your bank account to your trading account.

Then, you can transfer funds into your Demat account and place an order to buy shares online.

Next, the availability of shares is confirmed owing to the current market price. Lastly, the exchange processes your order. If T is your order execution date, the shares will reflect on your Demat account in T+2 days.

NOTE: A similar process applies when you sell shares from your Demat account. 

What are the types of Demat accounts?

It’s a no-brainer that there are a bunch of Demat accounts available. Each type serves various classes of investors:

Regular Demat Account

Investors who just require a digital space to store their shares can pick this one. In this, your shares will be added to the account as you purchase them.

Similarly, they get debited if you sell some of your holdings. So, that’s pretty much what you can do with a Regular Demat Account.

Basic Services Demat Account

This option is relatively recent. It encourages newbies to get accustomed to stock trading.

For the most part, these accounts don’t carry the hassles of maintenance charges.

In reality, zero maintenance charges only apply if your holdings are below Rs. 50,000.

Still, the charges you need to bear if your holdings are over Rs. 50,000 to Rs. 2,00,000 is pretty nominal. 

Repatriable Demat Account

These accounts are typically meant for non-resident Indians. If you invest in foreign stocks, this is for you.

However, note that you must remove your regular Demat account. It’s a must if you want to switch to a repatriable one.

Non-repatriable Account

This type of Demat account is also meant for NRIs. However, there are major differences between repatriable and non-repatriable accounts.

The latter doesn’t allow you to transfer earnings from India to an overseas account. So, repatriable accounts provide more flexibility if you trade on foreign stocks. 

Why should you open a Demat account?

Now that you know the types of Demat accounts, let’s check their benefits:

Ease of holding shares digitally

If you’re an experienced trader, you know about the lengthy paperwork involved in physically holding shares. This undoubtedly increases the risk of theft, damage, and forgery.

Demat accounts help you in digitalizing shares. As a result, they are relieving you of all this stress. 

Status of all online holdings at a glance

Just like you handle your bank account online, Demat accounts offer more or less the same functionality.

Also, you can use your mobile or PC to access your Demat account anytime. 

The convenience of storage and transfer 

We know that a Demat account allows you to store all your shares in an organized fashion.

Also, it frees you from the burden of holding physical documents.

Furthermore, an online transfer also leads to faster transactions. It significantly reduces the physical transfer processing time. 

A reservoir for different investments

For the record, Demat Accounts don’t just store shares.

Instead, they serve you as a storage channel for bonds, mutual funds, government securities, & ETFs as well. 

Assigning a nominee

Just like bank accounts, a Demat account allows you to pick a nominee.

In such circumstances, your Demat holdings will be transferred to the nominee’s account. 

Automatic reflection of bonus stock splits

There are frequent fluctuations in companies’ stocks that issue shares.

Cases like bonus issues and stock splits result in changes in your holdings.

Such changes will automatically reflect in your Demat account. 

Final Words

Maintaining a Demat account for your holdings is crucial to a hassle-free investment journey. Also, now you know the convenience of bearing no risks of physical certificates.

We hope that this piece has cleared your doubts surrounding what a Demat account is.

If you want to dive in further, do check out Piramal Finance. This will give you further insights into all things Demat, financial products, personal loans and business loans. So, what are you waiting for? Get started with your Demat account to facilitate easier trading today!