Demat Account
A Demat Account (short for “Dematerialized Account”) is an electronic account used in India to hold and manage financial securities like stocks, bonds, mutual funds, exchange-traded funds (ETFs), and government securities in digital form. It eliminates the need for physical certificates, making it easier and safer for investors to trade and hold assets.
Key Services of a Demat Account
- Holding Securities: Safely stores shares, bonds, and other securities in electronic format
- Transaction Management: Facilitates the buying and selling of securities through easy debit (sell) and credit (buy) operations
- Corporate Benefits Management: Automatically credits dividends, interest, bonus shares, or rights issues to the account
- Nomination Facility: Allows users to nominate a person to inherit the account in case of the holder's demise
- Easy Access to Mutual Funds: Enables investment in mutual funds and other instruments through the same account
- Pledging Securities: Helps in availing loans by pledging securities held in the Demat Account
- Portfolio Management: Provides a consolidated view of holdings, making it easier to track investments
- Risk-Free Storage: Eliminates the risk of theft, forgery, or damage to physical share certificates
Who Provides Demat Services?
Depository Participants (DPs): These are intermediaries that offer Demat services.
Examples: Banks, stockbrokers, and financial institutions.
The two main depositories in India are: National Securities Depository Limited (NSDL) & Central Depository Services (India) Limited (CDSL)
