Everything You Need to Know About Demat Account

What is a Demat account?

A Demat Account, also known as a Dematerialisation Account, offers the option of holding shares and assets electronically. Online trading makes transactions simpler for customers. Investments made by individuals in government securities bonds, equities, exchange-traded funds, and mutual funds are stored in one place i.e., a Demat account.

Demat made it possible for the Indian share market to become more digital and forced SEBI to practice stronger governance. Moreover, the Demat account reduced the chances of fraud, destruction, and theft by storing assets in electronic format. In 1996, NSE launched this digital platform.

Investors initially used to open an account manually, which takes several days to activate, while online Demat account opening takes only 5 minutes. The digital way of account opening skyrocketed during the pandemic.

What is Dematerialisation?

Dematerialization is the method of converting tangible share certificates into digital form. It is a seamless process easy to maintain and accessible from anywhere globally. An investor must open a Demat account with a Depository Participant (DP) to be a part of participating in online trading. Dematerialization intends to eradicate physical share certificates and make the monitoring and tracing of holdings easier for investors.

Demat has converted the laborious and time-consuming process of providing share certificates by speeding up the procedure and keeping security certificates in digital format. Once your Demat account is activated, you can transfer paper certificates into digital ones by providing all of your tangible securities and a Dematerialisation Request Form (DRF). Also, don’t forget to mark “Surrendered for Dematerialisation” on every tangible certificate you receive. Once you submit your share certificates, an acceptance slip will be given to you.

How to open a Demat account with Bigul?

• First, visit the Bigul website https://bigul.co/open-account
• Enter your mobile number and email address in the box
• Verify your PAN and Aadhar card details
• Fill up your personal and bank account details
• Choose the segment of your choice to make investments
• Click on the e-sign button to begin your Demat account

Charges for Demant account

• Bigul doesn’t charge an account opening fee
• Annual Maintenance Charge (AMC) is free for 1 year

Documents Required

You need documents that meet KYC (Know Your Customer) requirements to open a free demat account. Generally, the documents are:

• Permanent Account Number (PAN) (compulsory as per regulations)
• Aadhar card
• Bank statement (last 3 months)
• Proof of Address

Types of Demat Account

Depository Participants provide three distinct types of Demat accounts

• Regular
• Repatriable
• Non-repatriable

Features of Demat Account:

• Easy accessibility and mobility in stock trading.
• Maximum security is guaranteed during trading, excluding the loss, falsification, or theft of certificates.
• Reduced paperwork and minimized the risks involved with it.
• No stamp duty is required on the transfer of shares and lower cost per transaction than physical trading.
• No “odd lot” problem: even a single share can be sold.
• Only one Demat account can hold investments in stocks and debt securities.
• Traders are not restricted. They can work from anywhere (e.g., even from home)
• The depository participant does the transaction of securities, eliminating the need for notifying companies.

Advantages of Demat account

1. It is a reliable and efficient way to hold securities.

2. It guarantees the quick transfer of securities.

3. On the transfer of securities, stamp duty is exempted.

4. Physical certificate risks, including delayed delivery, phony securities, theft, and others, are avoided.

5. The amount of paperwork, transaction costs, etc., associated with the transfer of securities has significantly decreased.

6. There is no issue with odd lots; even one share can be sold.

7. The need to communicate with each company separately is eliminated by having a change of address registered with DP and registered with all companies in which the investor holds securities.

8. DP transmits securities by terminating communication with enterprises.

9. Shares resulting from bonus splits, consolidations, mergers, etc., may be automatically credited to a Demat account.

10. It is feasible to hold equities and debt securities investments in a single account.

Difference between Demat Account and Trading Account

• The terms Demat and Trading account are often confused or used interchangeably, but they are completely different. Let’s see how here:
• Demat accounts only allow investors to store shares and securities in electronic form, while Trading accounts are used to place buy and sell orders on exchanges.
• Demat account owners are required to pay an annual maintenance fee, but this does not apply to Trading accounts.
• Approval to open a Demat account is mandatory from SEBI and NSDL but is not required for Trading accounts.
• Demat accounts are useful for investing only in the stock market, while Trading accounts are said to be suitable mainly for traders in the derivatives segment such as commodities, indices, currency, futures & options.

Therefore, individuals who tend to trade in stocks and securities on the country’s secondary market should ensure that they know the basic knowledge to discover the Wealth Coast by wit and not by fluke.