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How to Use a Demat account?

DEMAT account facts that you should know

Opening a Demat account has several benefits. Some of these include reduced paperwork, lower transaction settlement time, cost savings, and safely holding all investments in one place.

Let us discuss about Demat account and the important terms associated with it:

Dematerialize Securities

Historically, investments were held in a physical form, which was risky due to loss, theft, or damage. These have now been eliminated as all physical certificates can be converted electronic forms, and held in the Demat account.

Re-materialize Securities

If the Demat holdings need to be re-converted into the physical form, individuals can easily re-materialize their securities. A re-materialization request form (RRF) must be submitted to the concerned depository participant (DP) for such re-conversion.

Nomination Facility

Individual investors can identify any other person as a nominee at the time of opening Demat account. This ensures that in the case of the death of the account holder, all the holdings in the Demat account are transferred in favour of the nominee, thus avoiding a long, cumbersome procedure.

Investing

Investors can invest in different financial products using a single Demat account. These instruments include bonds, mutual funds, exchange-traded funds, shares, and government securities. Investments in initial public offerings and systematic investment plans are also possible through a Demat account.

Tracking and Monitoring

Historically, tracking and monitoring all of one’s investments under different asset classes was tedious and difficult. With a Demat account, monitoring and tracking all investments is convenient because all details are available in a single location. This allows the investor to determine the profit and loss he or she is making, which can help him or her make the right investment decisions.

Statements

Account holders can receive periodic statements showing their current holdings. They can choose physical statements mailed to their registered address or electronic statements through email.

Corporate Benefits

Receiving refunds, dividends, and interest payments is easier through a Demat account because it is directly linked to the bank savings accounts. This makes it quicker and simpler for companies to transfer funds to all their shareholders, which also helps reduce related expenses.

Corporate Actions

Organizations often declare bonus, split, or right issues for the additional benefit of their investors. Information on all current shareholders is directly availed through the central depository and the various depository participants. The benefits associated with any of these actions is directly available in the investor’s Demat account.

Modifications

If the investor changes his or her address, bank or signature, he or she need not communicate such modifications to all the companies where he or she has invested. Providing these changes to the depository participant for updates ensures the information is made available to all the concerned companies.

Power of Attorney

When required, account holders can provide a power of attorney (POA) to another person. This POA allows the person to operate the account on his or her behalf.

Transmission

All the investor’s holdings in the Demat account can be transferred to the nominee, survivor, or legal heir, in case of the investor’s demise through a transmission form.

 

Further information on what is Demat account is and how to open Demat account is available here.