Demat Account is an account that is used to hold shares and securities in electronic format. The full form of Demat account is a dematerialised account. The purpose of opening a Demat account is to hold shares that have been bought or dematerialised (converted from physical to electronic shares), thus making share trading easy for the users during online trading.
What is dematerialisation?
Dematerialisation is the process of converting the physical share certificates into electronic form, which is a lot easier to maintain and is accessible from anywhere throughout the world. An investor who wants to trade online needs to open a Demat with a Depository Participant (DP). The purpose of dematerialisation is to eliminate the need for the investor to hold physical share certificates and facilitating a seamless tracking and monitoring of holdings.
List of Documents to open a Demat Account:
- Proof of Identity (POI) (Eg.: Driving license).
- Proof of Address (POA) (Eg.: Passport).
- Proof of Income (For trading in derivatives such as F&O) (Eg.: Copy of ITR Acknowledgement).
- Proof of Bank Account (Eg.: Cancelled cheque).
- PAN Card.
- 1 to 3 passport size photographs.
Benefits of a Demat account:
- Lower risks
- Easy holding
- Odd lots
- Reduced costs
- Reduced time
Types of Demat Account:
- Regular Demat Account: This is for Indian citizens who reside in the country.
- Repatriable Demat Account: This kind of Demat Account is for non-resident Indians (NRIs), which enables money to be transferred abroad. However, this type of Demat Account needs to be linked to a NRE bank account.
- Non-Repatriable Demat Account: This again is for the NRIs, but with this type of Demat Account, fund transfer abroad is not possible. Also, it has to be linked to an NRO bank account.