Importance of Demat Account
A demat account is the best and most secure way of holding securities. It eliminates the risk of theft, forgery, loss and damage of physical certificates. A demat account ensures immediate transfers of securities. Once the trade is approved, the shares and securities are automatically transferred to your account. Automatic credit of shares can take place in the event of a bonus received, company merger, consolidation, etc. Demat account information regarding these activities is available online by simply logging into the account. You can trade on the go and from anywhere—using your smartphone or desktop. So, the need to visit the stock market to make transactions is eliminated. You also enjoy the benefit of reduced transaction costs because there is no stamp duty involved with the transfer of shares.
Types of Demat Account
As an investor, a demat account helps you to hold shares and securities in an electronic form instead of taking physical possession of share certificates. Information about demat account is provided and shared by the depository participant. There are two types of demat accounts—Repatriable demat account and Non-repatriable demat account. Repatriable funds are deposited in a separate bank account known as the Non-Resident External Account (NRE account). Repatriable funds are those funds which can be transferred abroad. The investments made from these funds are maintained in a Repatriable demat account. On the other hand, non-repatriable funds (amounts which cannot be taken abroad) are deposited in a different bank account known as the Non Resident Ordinary Account (NRO account). The investments made from these funds are deposited in the Non-repatriable demat account. Money can easily be transferred from an NRE to an NRO account. However, once the transfer is made, the repatriability is lost and the money cannot be transferred back to the NRE account.
The main benefit of a demat account is safety. Long-term investments can be safely and securely maintained over the Internet. It eliminates the risk of holding shares and bonds in the physical form. The chances of forgery, duplication, and loss of share certificates are nil. Another important benefit of a demat account is convenience. You can trade online anywhere, anytime through your online account. Opening an account significantly reduces brokerage charges, as stamp duty does not have to be paid. The dematerialization system also allows investors to buy, sell, and trade without paperwork and delays. In short, demat account is easy and convenient because it allows quick transfers and reduced transaction costs without large transaction size requirements.
How Does a Demat Account Work?
Trading through a demat account is similar to the procedure of physical trading, except that a demat account is electronic. You begin trading by placing an order through your online trading account. For this purpose, it is necessary to link both trading and demat accounts. Once an order is placed, the exchange will process the order. Demat account details the market price of shares and the availability of shares is verified before the final processing of the order. On completion of the processing, shares are then reflected in your statement of holdings. When a shareholder wishes to sell shares, a delivery instruction note has to be provided with details of the stock. Shares are then debited from the account and the equivalent cash value is credited to the trading account.
Things You May Also Like to Know
Are there any demat account opening charges?
No, there are no demat account opening charges. You can open either a trading account or a demat account free of charge. However, every share broker charges transaction/operation fees. Failure to pay these fees may result in the freezing of the account. Angel Broking announced the lifetime free demat account and free trading apps. A 20% discount is offered on online trades with leverage up to 40 times. You can open demat account
and trading account for trading securities, stock, gold, ETF's, currencies, etc. Angel Broking offers the following products for trade—online Forex Trading account, Online Commodities Trading account, Online Currency Trading account, Online Equity Trading account and Online Derivatives Trading account. Through these accounts, you can trade online without having to depend on a stockbroker.
How long does it take to open a demat account?
Usually, it takes about a week or two to open a demat account
. However, the period may extend to 15-20 days if the processing time is longer. The documents required to open a demat account are identity proof like PAN card, copy of valid residence proof, existing financial balance sheets and recent photographs. Once the applicant’s details are verified, the application is processed. The broker then dispatches a welcome kit with details of the applicant’s User ID and password. One can access their demat account using these details and begin trading in the stock market. It is essential that you open a demat account with a reputed stock broking company like Angel Broking.
If you already have a demat account with a particular depository and wish to change to another, you can do so. You have to fill the Delivery Instruction Slip (DIS) book and submit it to your broker. Fill the relevant details like your securities information, ISIN number, and the new depository participant's ID (An ISIN number is a unique 12 digit alpha-numeric identification number allotted for a security). Your broker will then send your request to the Depository Participants (DP). The Depository Participants (DP) will then transfer the shares to your new demat account. If the DIS form is duly filled, the transfer takes place within 24 hours or the next business day. Brokers charge a price for the transfer of a demat account. Charges differ from broker to broker.
I have submitted my application. What happens next?
Once you have submitted your application for an account, you will have to wait for its processing. It usually takes a week or two for the completion of the verification process.
After submitting your application, the DP carries out verification of the details provided on the Account Opening form. On completion of the verification, your application is processed and a welcome kit is dispatched. The welcome kit contains your user ID and password. You can then log into your account using these details and begin trading online. It is advisable to change your password for security reasons.
How do I get my user ID and password?
After submitting your application, the DP carries out a verification of the details provided on the Account Opening form. On completion of the verification, your application is processed and a welcome kit is dispatched. The welcome kit contains your user ID and password. You can then log into your account using these details and begin trading online.
Your user ID and password are completely safe. Angel Broking does not dispatch the welcome kit containing the user ID and password to anyone except the client, as it contains confidential information. Once you receive your account details, it is advisable to login and change your password for security reasons.
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