What is a Demat Account?

Dematerialisation or demat account is an account that holds your investment in securities and shares in an electronic form. Typically, buying equity shares in physical form involves a lengthy procedure with a lot of paperwork. Additionally, there is always the risk of investing in counterfeit shares. This is why it is important to hold a demat account as it not only enhances the investor’s experience, but also simplifies and streamlines the entire process. During online trading, your demat account will come in very handy as it’ll help maintain your shares and securities in electronic or dematerialised form. Besides, converting your securities into digital format will make it easily accessible and allow you to trade online without any hiccups.

As an investor, you must know that it is mandatory to have a demat account number if you want to settle trades electronically. If you are confused about how a demat account works, here’s a tip that will help you understand it better -

Take a moment and think how your bank account functions. Your demat account is not very different. When you buy and sell shares, the transaction will be debited/credited from/to your demat account. It’s a zero balance account, which can hold a plethora of investments like bonds, mutual funds, government securities, exchange traded funds and equity shares.

Now, let’s discuss the various facilities offered by demat account.

Features of Demat Account

Share transfers

A demat account online can be utilised by investors to transfer their share holdings. It’s important to note that a Delivery Instruction Slip (DIS) is necessary for conducting share trading. All relevant information has to be furnished on the slip for facilitating a smooth transaction.

Loan facility

You can gain access to a variety of bank loans through the securities maintained in your demat account. These securities can be pledged as a collateral for obtaining a loan from your bank.

Dematerialisation and Rematerialisation

First of all, dematerialisation refers to the conversion of your physical share certificates into electronic form. Conversely, rematerialisation is the process of converting your electronic securities back into material form. Make sure to provide your Depository Participant (DP) with all the necessary instructions for facilitating a hassle-free experience.

Numerous access options

Did you know that your demat account can be accessed through multiple media? All thanks to technology, you can conduct trading, monitoring, investing and various security related operations through any electronic device with an internet connection.

Corporate actions

By maintaining a demat account, you can avail benefits that come with owning securities. So, if a company provides refunds, dividends or interest, all account holders are automatically marked as eligible for receiving these perks. Additionally, your demat account will be updated in case of corporate actions pertaining to equity shares like right shares, stock split or bonus issue.

Freezing demat accounts

As a demat account holder you will be provided with the option of freezing your account for a specific time frame. It can be done to avoid any unanticipated transaction to/from your account. In order to take advantage of this facility, account holders need to maintain a specified quantity of securities in their accounts.

Overall, a demat account will help you hold shares and securities in a convenient and secure manner. It removes the threat of forgery, theft, damage and loss of physical certificates. Besides, your securities can also be transferred quickly using a demat account. After the trade is approved, the shares and securities can effortlessly be moved to your account.

Shares are credited automatically in an event of company merger, bonus received, consolidation, etc. All information regarding these activities is conveniently available in your account and all you have to do is simply login to view this information. Additionally, you can easily trade from anywhere using your laptop, smartphone or tablet.

The procedure of trading through a demat account is not very different from that of physical trading, except for the fact that the former is electronic. You will initially be required to place an order via your online trading account for executing a transaction. After an order is placed, the exchange will be processed. Important details like the availability of shares and its market price will be taken into consideration before the final processing of the order.

All investors should seriously plan to open a demat account. If you are still confused about how to open demat account online, head straight to Axis Direct and do it in 15 minutes flat!