For many people, particularly those who do not deal with the stock market, the term Demat account is new. There are many advantages of the same if one deal in this market but for that one needs to have at least one demat account opened with any stockbroker or stock broking company. It is simple to get this account opened and start dealing in the share market. It can be defined as an account which holds all the shares and bonds, purchased by the account holder, in an electronic form is called a demat account. It is used when people make investments on various fronts and want to keep tabs on their status. The concept has been introduced to eliminate the burden of possessing physical certificates. This alternative stores every information in an electronic mode, which rids the user of all the worries which comes with obtaining hard copies of each venture. The demat account of every holder is linked to their bank account, so that money transfer for all purposes is seamless. All forms of securities, including exchange-traded funds and mutual funds, are kept safe with the help of this account.
Benefits of having a Demat Account
Possessing the best demat account in India has its perks. The owners have the following advantages:
- Security: The digital format, complemented by secure servers, makes it the safest form of storing sensitive data related to the securities. This is one of the top reasons why demat accounts are widely accepted. There is no loss of data, bad deliveries, theft, delays, etc. and the transfer of all funds are initiated in an encrypted manner.
- Convenience: The paperwork for the allocation of shares and bonds is no longer required. If there is a change of address, the user has to inform only the Depository Participant (DP), and all the changes are made in the details by the authority. Evidently, there is a marked reduction in the hassle any demat account holder has to go through.
- Efficiency: Since the transfer of shares is done by the DP, there is no need to notify any concerned company about the action. One account will hold every data regarding all the shares has purchased, and both debt and equity investments can be stored.
- Economical: Demat accounts can be handled from any corner of the world, during any time of the day. Stamp duties and other fees are not required for the account. Visits to the broker is also a forgotten history.
The Procedure for Opening a Demat Account
To open a demat account, the user must possess the following documents:
- PAN card
- Bank Statement (of the last three months)
- Proof of address
- Bank crossed check
- Two colored photos
These documents must be submitted to the DP and if required, sign a contract with a stockbroker. After an in-person verification, the user will have access to their demat account after the DP gives them the essential details regarding the active account.