A Demat Account is an account that is used to hold shares and securities in electronic format. The full form of the Demat account is a dematerialized account. The purpose of opening a Demat account is to hold shares that have been bought or dematerialized (converted from physical to electronic shares), thus making share trading easy for the users during online trading.

In India, depositories such as NSDL and CDSL provide Free Demat account services. Intermediaries, depository participants, or stockbrokers—like Angel Broking—facilitate these services. Each intermediary may have Demat account charges that vary as per volume held in the account, type of subscription, and terms and conditions between a depository and a stockbroker.

What is Demat account?

A Demat Account or Dematerialised Account provides the facility of holding shares and securities in an electronic format. During online trading, shares are bought and held in a Demat Account, thus, facilitating easy trade for the users. A Demat Account holds all the investments an individual makes in shares, government securities, exchange-traded funds, bonds, and mutual funds in one place.

What is dematerialisation?

Dematerialisation is the process of converting the physical share certificates into electronic form, which is a lot easier to maintain and is accessible from anywhere throughout the world. An investor who wants to trade online needs to open a Demat with a Depository Participant (DP). The purpose of dematerialisation is to eliminate the need for the investor to hold physical share certificates and facilitating a seamless tracking and monitoring of holdings.

Importance of Demat account

A Demat account provides a digitally secure and convenient way of holding shares and securities. It eliminates theft, forgery, loss, and damage of physical certificates. With a Demat account, you can transfer securities immediately. Once the trade is approved, the shares are digitally transferred to your account. Moreover, in case of events like stock bonuses, mergers, etc., you get shares automatically into your account. Your Demat account information regarding these activities is available online by simply logging into the website. You can trade on the go using your smartphone or desktop. So, you needn’t visit the stock exchange to transact. You also enjoy the benefit of reduced transaction costs because there is no stamp duty involved with the transfer of shares. These features and benefits of a Demat account encourage a larger trade volume by investors, thus increasing the potential for lucrative returns.

How does a Demat Account work?

Trading through a Demat account is similar to the procedure of physical trading, except that a Demat account is electronic. You begin trading by placing an order through your online trading account. For this purpose, it is necessary to link both trading and Demat accounts. Once an order is placed, the exchange will process the order. Demat account details the market price of shares and the availability of shares is verified before the final processing of the order. On completion of the processing, shares are then reflected in your statement of holdings. When a shareholder wishes to sell shares, a delivery instruction note has to be provided with details of the stock. Shares are then debited from the account and the equivalent cash value is credited to the trading account.

Types of Demat account

There are two types of Demat accounts—Repatriable Demat account and Non-repatriable Demat account. Repatriable funds are deposited in a separate bank account known as the Non-Resident External Account (NRE account). Repatriable funds are those funds that can be transferred abroad. The investments made from these funds are maintained in a The Repatriable Demat account holds the investments made from repatriable funds. On the other hand, non-repatriable funds (funds that cannot be taken/transferred abroad) are deposited in a different bank account known as the Non-Resident Ordinary Account (NRO account). The Non-repatriable Demat account holds the investments made from non-repatriable funds. Money can easily be transferred from an NRE to an NRO account. However, once the transfer is made, the repairability is lost and the money cannot be transferred back to the NRE account.

Benefits of opening a Demat Account with Angel Broking

Angel Broking is one of the most renowned stockbroking houses in India. The Angel Group is a member of the Bombay Stock Exchange (BSE), National Stock Exchange (NSE), and the two leading Commodity Exchanges in the country: NCDEX & MCX. Angel Broking is also registered as a Depository Participant with CDSL. Here are some benefits of opening a Demat account with Angel Broking:

  • Invest Easily & Earn Better
  • Gain access to the award-winning Angel Broking App – Trade, learn, and stay updated on the go. The app gives you latest news, research reports, and real-time updates on your fingertips. It also offers Portfolio Health Check to help you maintain an ace portfolio
  • Get a better chance of earning higher returns with ARQ
  • Fastest account opening process – Start trading in 1 hour
  • Highly secure & speedy financial transactions

Demat Account Reference - Meaning of Demat Account Jargon

Electronic Certificate

Bank account, trading account, and Demat account are the three essential necessities while dealing with investments. When you purchase a company’s shares, your ownership is marked with a certificate. This certificate is now available in electronic format and is known as Demat credit.

Central Depository (CD)

Central Depository is basically a central agency that maintains all the relevant information pertaining to Demat accounts that are opened with DPs throughout the country. India’s central depository agencies include National Services Depository Limited (NSDL) and Central Depository Services Limited (CDSL).

Depository Participants (DP)

The DPs or Depository Participants are fundamental intermediaries between the account holders and the Central Depository. DP’s include several banks, brokerage firms, and other financial institutions that offer investors with Demat accounts.

Portfolio Holding

The Demat account of an investor keeps all his investment holdings of investors including: equity holdings, exchange-traded funds, mutual funds, government securities and bonds. All the holdings together are referred to as the investors’ portfolio holding, which they can access through their Demat account. All their purchases are reflected as Demat credits while all their his sale transactions are debited from the Demat account.

Transaction Identification

In order to buy and sell electronic securities, every investor needs a trading account, which is as important as a demat account. Every trading account is given a unique identification number that has to be used for all the transactions of an investor.

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