Demat account meaning dematerialization of a physical account where the investors are allowed to share certificates or securities in electronic form instead of physical form. Like in the bank account, one can hold the money electronically; they can also give securities in electronic form. This makes the cumbersome process of holding various investments like shares, bonds, mutual fund investments easier and reduces all the problems associated with the physical handling of documents.
A person investing in the share market has several benefits if he already owns a Demat account. And in case you don’t have an account, Opening a Demat accountcan be done easily online or even by talking to your banker or financial institution.
To openDemat account online there are many points attached which are not quite clear to every person out looking to invest in share market. Some of the main points which should be considered or read about before planning to open a Demat account are-
1. After opening the account, no stamp duty is required for any transfer related to security purposes which means the time consumed in the process will be reduced, and also the documents involved in the process become limited.
2. The best Demat accountwould allow the shares or the money to be kept as collateral. This is one of the best features associated with a Demat account. The loan which is taken against this account is called ‘loan against shares’ in which the person has to take a pledge that the securities in the Demat account can be used to take a loan.
3. If one wants more than one account, for example, a discount broker and another full-service account, they do not need to open another trading account. The existing account can be given to a new broker who will properly monitor all the investments/ trades made in a single place.
4. One of the key points about having a Demat account is that if the account is not used for six months continuously, it freezes and becomes dormant. If the person wishes to resume the account, they have to get the KYC done again which is tiring and time-consuming. Therefore, it is better if one decides to close the account instead of stopping using it entirely.
5. The account number of any Demat account is 16 digits in the case of CSDL whereas, in the case of NSDL, the account number starts with IN and is followed by 14 digits.
The best Demat account in India is the one that has all the major features associated with it like stamp duty, freezing if the account is not used continuously, etc. A Demat account is very versatile and helps one to sell as many shares as they want to or just a single share. One can easily get hold of all the equity and debt instruments at the same time. The account automatically updates itself and comes at a lower cost and lesser risks.