Demat Account- Procedure to Open And Benefits
Five years ago India witnessed a surge in online share trading. This marked a relief from the tedious trading in physical form such as exchanging security certificates. Not only did the latter put a dent in time but one’s wallet as well.
In this article we will understand the process of demat account opening and its benefits. However did you know that some faction of people still are stuck the vicious circle of physical trading?
Stuck in inconvenience-
There are some people who store securities physically in the form of certificates and oversee the benefit of online trading. They are so reluctant that opening demat account seems a far thing to do.
One of the main reasons behind this is lack of knowledge about process of demat account opening especially in rural areas.
On the other hand, few are suspicious about the safety and complexity involved in demat account opening. However, what they don’t understand is the far more cumbersome nature of physical storage of securities in the form of numerous certificates which can easily get lost or damaged.
Further let’s understand the process to open a demat account which is absolutely easy-
Demat account means Dematerialized account. It favors storing and trading of securities electronically unlike storing them in physical form.
The process can be affiliated with the working of bank accounts.
Explained with an example-
You use savings account to deposit as well as withdraw money. Likewise, demat account favors withdrawal and deposition of stocks, bonds, NSCs and debentures.
Online trading is a process of selling and buying of the shares online. After demat account opening, the process to sell and buyshares online and the following transaction is automatically adjusted in the demat account.
What is a Depository Participant?
Depository participant (DP)is an entity which at regular intervals provides the holder with valid statements of his personal holdings and the transactions. You can compare this with abank’s passbook or bank account statement.
Demat account Opening is a compulsion for everyone who want toinvest and trade in Indian stock market. This is mandated by SEBI which is the supreme Indian market regulator. Therefore, it is important to register demat account opening with SEBI-registered DP (Depository Participant).
Benefits of Demat Account
- Freedom from worrying about loss and experiencing utmost convenicence-Demat account enables easy share trading online which is fast and convenient. You can sell or buy and redeem your debentures within few minutes. Hence, you’re freed from cumbersome paper work.
- A person experiences diversity which means one can easilytrade acrossseveral investmentstypes like shares and bonds as well as debentures followed by futures and options trading.
- You get computerizedrecord of all transactions
- One receives direct credit details of all his dividends and interests which are transferred to his associated bank account
- Get computerizedupdate on events like bonus and other benefits
- Experience the ease of online trading which enhances overall trading experience.