Such accounts are of crucial importance today because, the entire financial platform of investing, trading and maintaining have become digitised. Hence, to enable the user with a seamless and straightforward experience, demat accounts are the necessity of the day. These accounts are essential to trade in India’s stock exchanges. Although SEBI – Securities and Exchange Board of India, has permitted traded up to 500 shares to be settled in the physical form, it is not a preferable option these days since it causes excessive inconvenience of maintenance and tracking.
This account retains certificates of financial instruments such as shares, bonds, government securities, etc. Thus, the dematerialisation account aids the investor to maintain their investments systematically as well as concedes an easy movement to buy and sell any products they desire.
A Demat account is more than just an account to hold securities. Through digitisation, it adds to market transparency and better regulation.
Investing in physical shares is a lot of paperwork together with a lengthy procedure and a high risk of receiving fake shares. To keep this entire process simple and streamlined, an investor should choose to open a demat account.
Online trading, enables the shares and securities to be held in such an account in dematerialised or electronic format. Dematerialisation is the process of converting the physical share certificates to an electronic form to increase its accessibility
As per SEBI guidelines, such accounts are mandatory for every shareholder who intends to trade in stocks and shares and other products.
Hence, to settle trades electronically, an investor requires a specific demat account number.
It is a similar concept to that of a bank account; wherein there is a record of the debt and credit of the balances maintained in a bank passbook. Likewise, when a purchase or sale of a share is undertaken, it will be either credited or debited to or from the account respectively. Thus, holding a such an account allows the investor to buy and sell shares or any other product and hold them safe and sound.
A demat account can be used to retain several investments like shares, stocks, index and gold, bonds, Government securities, open a demat account without owning any shares or products together with maintaining a zero balance account.