Features & Benefits of Opening a Demat account

Demat accounts were introduced in India in the year 1996, prior to which shares and securities were physically issued and traded. These securities are now available to hold electronically through Demat accounts. This makes the entire procedure of investing, holding, monitoring, and trade, faster, convenient, and cost efficient.

Features of Demat account

  • Easy Share Transfers:

    Investors can transfer their holdings through a delivery instruction slip (DIS) or receipt instruction slip (RIS) for buying or selling shares. These slips allow users to provide all the details that are required for executing a transaction smoothly.
  • Faster Dematerialization & Rematerialization of Securities:

    Demat account holders can provide instructions to their depository participant (DP) to convert physical certificates into electronic form. Alternatively, electronic securities can also be reconverted to physical form, if required.
  • Pledging facility to avail loan:

    Several lenders provide loans against securities that are held in the Demat account of the borrowers. These holdings are used as collateral to avail loans by the account holders.
  • Freezing Demat accounts:

    Demat account holders can freeze their accounts for a certain period, if required. This option can be beneficial if one wants to prevent unexpected debit or credit into one’s Demat account. The freezing option is also available for a specific quantity of securities held in the account.
  • Multiple Accessing Options:

    Demat accounts are operated electronically, which means these can be accessed using multiple modes. These accounts can be accessed through the Internet using a computer, smartphone, or other smart devices.
  • SPEED E-Facility:

    The National Securities Depository Limited (NSDL) allows users to send instruction slips electronically instead of physically submitting the slip to the DP. This makes the procedure more convenient and less time-consuming.
  • Corporate Benefits & Actions:

    If the companies offer dividends, refunds, or interest to their investors, these benefits are automatically available to the Demat account holders. In addition, corporate actions like bonus issues, right shares, or stock split are automatically updated in the Demat account of all the shareholders.

Benefits of a Demat account

  • Lower Risks:

    Physical securities are risky due to thefts, loss, or damage. In addition, bad deliveries or fake securities pose further risks. These risks are completely eliminated with the opening of a Demat account, which provides holders the option to hold all their investments in an electronic form.
  • Easy Holding:

    Maintaining physical certificates is a tedious job. Moreover, keeping a track on their performance is an added responsibility. Demat account holders can make it more convenient to hold and track of all their investments through a single account.
  • Odd Lots:

    With physical certificates, buying and selling were possible only in the specified quantities. The convenience of dealing with odd lots or single security was also not available. Demat accounts eliminate this issue.
  • Reduced Costs:

    Physical certificates involved several additional costs, such as stamp duty, handling charges, and other such expenses. These extra expenses are completely eliminated with Demat accounts.

Demat accounts are simple, fuss-free and extremely lucrative. In today’s day and age, they are a must for financial planning.