A demat account is a bank account which serves the purpose of holding shares electronically. It is a requisite for people buying and selling shares regularly and dealing in stock exchange and stock markets.As per the Securities and Exchange Board of India (SEBI), shareholders and people dealing with more than 500 shares can’t deal in the stock markets unless they have a demat account.
Why do you need a Demat account?
A account is the best way to hold shares, just the way a bank account is for holding money. The best account is free of scams such as mutilated share certificates, postal delays, and bogus shares.
Advantages of holding a Demat account
Holding a demat account for share trading and stock exchange has various benefits. Few of those benefits are as follow:
Public shares are credited automatically and faster if you have a demat a/c. Since a demat a/c holds shares electronically, you can control your transactions through internet and email. Thus, it’s easier for you to manage shares in the long run. In case of a financial emergency, holding shares electronically in a demat accountare easy to liquidate when required. You can sell shares during the transaction hours on working days from 10:00 am to 3:30 pm. The payments from selling the securities are received very fast.In case you have to change your personal details in the demat a/c you hold, the process is easy and very simple. All you have to do is inform the depository participant of the change and your work is done. You can change your registered address, signature, Dividend Mandate, registration of power of attorney, transmission etc. via this process.
How do you open a Demat Account?
Share trading mainly happens through accounts. Thus, it is imperative that shareholders and people trading in the stock markets have a account. Here are some points that one must keep in mind:
A person needs to be 18 years old to be eligible to open a demat and deal in trades and shares.
Select a Depository Participant
Your depository participant can be a bank, a custodian, a broker or any financial institution that is ready to act as your agent. The best demat a/c usually has an effective depository agent who deals and transacts on behalf of the customer.
Filling out the application form for opening a demat account with a bank is just the beginning, but an important part of the process. Follow the given format and submit all the required documents with the application form.
Key points to remember while opening a demat account
It is essential to have a PAN card to have demat account
In case you don’t use your demat for a particular period of time, the bank has the right to close it.