What is a Demat Account in India: Types, Benefits, and How to Open One

Investing today is no longer about physical share certificates. The entire process has become digital, faster, simpler, and more secure. At the centre of this change lies one essential account every investor must have, i.e. a free Demat Account. Let us see what is a demat account and why it is an important part of trading.

What is a Demat Account?

A Demat account is a digital space where you can store all your investments, such as shares, bonds, SIPs/mutual funds, etc, in electronic form.

Whenever you buy a share, it is automatically credited to your Demat account. When you sell it, the same share is debited instantly.

What Does “Demat” Mean?

The word “Demat” comes from the term “dematerialisation,” which means converting physical share certificates into electronic form.

Before this system existed, investors had to manage piles of paper certificates for every transaction. It was not only time-consuming but also risky, as those papers could be misplaced, damaged, or even forged.

A Short History of Demat Accounts in India

India introduced the Demat system in 1996 under the Depositories Act. The National Securities Depository Limited (NSDL) was the first to offer Demat services, followed later by the Central Depository Services Limited (CDSL).

Since then, trading and investing in India have become completely paperless. Today, having a Demat account is mandatory for anyone who wishes to trade or invest in the stock market.

Benefits of a Demat Account

A Demat Account has made the buying/selling of stocks simpler, safer, and efficient.

The following are some of the key benefits you should know:

1. Safe and Secure: Your investments are stored digitally, so they are protected from theft, forgery, or misplacement.
2. Convenient Transactions: The securities are credited or debited automatically from your Demat Account, eliminating paperwork and delays. Therefore, the process becomes quick and seamless.
3. Lower Costs: With no need for physical certificates, you save on stamp duty and other charges associated with traditional share transfers.
4. Easy Portfolio Management: All investments, whether in stocks, bonds, mutual funds, ETFs, or government securities, are stored in one consolidated place. So, you can track and manage your portfolio easily.
5. Quick Settlements: Settlement cycles give you faster access to your holdings compared to old paperwork. Today, transactions typically settle within T 1 days.

Different Types of Demat Account

A Demat Account isn’t one-size-fits-all. It depends on whether you are a resident of India, an NRI, or a small investor.

The following are the different types of demat accounts in India-

1. Regular Demat Account: It is meant for investors residing in India. It makes retail investors buy and sell stocks on Indian stock exchanges (NSE, BSE, MCX, and NCDEX).

Know the difference between NSE and BSE

2. Repatriable Demat Account: It is specially designed for Non-Resident Indians (NRIs) who want to invest in the Indian stock market but also want the option to transfer their funds back abroad. To operate this type of account, you need to link it with an NRE (Non-Resident External) bank account.

3. Non-Repatriable Demat Account: This account is also meant for NRIs, but the funds cannot be transferred abroad. It must be linked with an NRO (Non-Resident Ordinary) bank account. It is helpful for NRIs who earn in India and want to reinvest or manage their income within the country.

4. Basic Services Demat Account (BSDA): The BSDA was introduced by SEBI to encourage small investors to enter the stock market.

A simple way to get started is to open your free Demat account with ?0 AMC on Shoonya today.

Documents Required to Open a Demat Account

• Aadhaar card,
• PAN card
• Proof of Income (for F&O trading): (3 Salary slips, Form 16, or 6-month bank account statement)
• Bank account details
• Passport-sized photograph

Necessary Demat Account Details

Once your Demat Account is opened, make sure you have these details:

1. Demat Account Number: Also known as beneficiary ID. It is a 16-character combination.

2. DP ID: Unique Identification Number given by your broker.

3. POA Number: The Power of Attorney number is linked to the agreement you sign while opening the account.

End Note

A Demat Account not only makes the process of buying and selling shares hassle-free but also ensures your investments are safe, secure, and easy to manage. Whether you’re a beginner taking your first step into the stock market or an experienced investor building a diverse portfolio, a Demat Account is essential.

Want to learn the basics of investing and trading step by step? Check out these free trading courses in Hindi!

FAQ’s

1. What is a Demat Account?

A Demat Account, short for Dematerialised Account, is used to hold shares and securities in electronic format. It works like a bank account, but instead of money, it stores your investments digitally.

2. Which Demat Account is best?

It depends on your needs: regular demat Accounts for Indian residents, repatriable and non-repatriable accounts for NRIs, and basic services demat account (BSDA) for small investors with limited holdings.

3. What documents are required to open a Demat Account?

You need to provide proof of identity (like PAN card), proof of address (Aadhaar, passport, etc.), bank account details, and passport-size photographs. For trading in derivatives, proof of income is also required.

4. Can I open more than one Demat Account?

Yes, you can open multiple Demat Accounts with different brokers. However, each must be linked with your PAN card, which remains unique to you.

5. How to open a Demat Account online?

To open a Demat Account online, register on the broker's platform and fill out the application form with your basic details and PAN card. Then, complete your online KYC via selfie and e-sign the application.

6. How much time will it take to receive demat credentials?

Once your application and KYC documents are verified, you will usually receive your Demat Account number and login credentials within 24-48 hours.