Investing in capital stock in physical form involves a long procedure, a large amount of paperwork and the risk of obtaining false actions. To keep the complete experience easy and optimized, a demat account is required. While trading online, the demat account is used to hold shares and securities in dematerialized / electronic format. Under dematerialization, their share certificates are converted from physical form to electronic form to have increased accessibility.
As a trader, you must get a Demat account to settle transactions electronically. It is like a bank account in which you keep deposits in the bank, and the record of debit / credit balances are kept in a bank book. In the same way, when you buy or sell shares, it will be credited or debited to your best demat account in India, respectively. It can be used to maintain a variety of investments such as equity, exchange-traded funds, mutual funds, bonds and government securities. You can have a Demat account without owning shares, and you can keep a zero balance in your account.
- Demat account benefits
- Transfer of shares
A Demat account is used to transfer participations from an investor. It can be done using a Delivery Instruction Sheet (DIS) to perform operations with actions.
- Loan facility
The shares in your Demat account can help you have access to a variety of bank loans. You can pledge these securities as collateral to obtain a loan from your bank.
If you have a Demat account, converting the values in different ways becomes a simple task. You can give the necessary instructions to your depository participant (DP) for dematerialization, that is, for the certificates of physical actions to be converted into electronic format. Conversely, you can get the electronic values converted back to the physical form according to your requirements.
- Multiple access options
Due to the electronic operation, a Demat account can be accessed using numerous means. You can perform investment, trade, monitoring and other security-related operations using the Internet installation on a computer, smartphone or other handheld devices.
- Corporate Actions
Having a Demat account can help you take advantage of the benefits associated with stock ownership. Every time a company provides dividends, interest or refunds to its investors, all Demat account holders get access to these benefits automatically. In addition, corporate actions related to capital stock such as the division of shares, correct shares or bond issuance is updated in the Demat Accounts of the shareholders.
- Freezing of accounts.
Demat account holders can also go for freezing accounts for a duration, according to the requirement. It is done to avoid any unforeseen debit / credit on the Demat account. To take advantage of the freeze option, the account holder must have a specific amount of securities in their account.
- Speed E-Facility
The National Securities Depository Limited (NSDL) continues to extend various facilities for Demat account holders. Instead of the physical presentation of the sheet, the account holder can send the instruction sheets electronically to the participating depositary.