A Demat account allows you to hold various investments: Equity shares, Bonds, Government securities, Mutual funds, and Exchange-traded funds (ETFs). Like a bank account, assets in your Demat account get credited or debited every time as per your buying and selling requests.
A Demat account shares the same characteristics as a savings bank account. The way you store electronic cash in your savings account, you can keep securities in your Demat account. When buying any company’s shares, they will be credited to your Demat account. On the other hand, when you are willing to sell your shares, they will get debited from your Demat account. You will have to link your Demat account with your trading and savings (bank) account for seamless transactions.
With a Depository Participant (DP), you can open a Demat account in India that can be associated either with NSDL or CDSL. NSDL stands for National Securities Depository Limited, and CDSL stands for Central Depository Services Limited. Both NSDL and CSDL are two depositories that maintain the Demat system in India.
A Demat account is crucial to keep your investments safe and secure. When using a Demat account, you will not have to face any risks and challenges that come with physical share certificates. Now, there is no requirement for unnecessary paperwork.
Earlier, shares were held in a physical form through share certificates.
The process of trading shares and other securities was cumbersome and complicated in the earlier days. To get rid of these limitations, NSDL came into existence in 1996. NSDL stands for the National Securities Depository Limited, the oldest and largest depository in India. They brought the Demat system that allows you to store a variety of securities electronically.
You can convert your already owned shares to electronic records through a Demat account, known as Dematerialization. You can even convert your electronic shares into physical forms through Rematerialization.
There are primarily three types of Demat accounts in India: Regular Demat accounts, Repatriable Demat accounts, and Non-repatriable Demat accounts. In addition, another Demat account is called Basic Services Demat accounts (BSDAs), introduced by SEBI in 2012 to reduce the burden associated with Demat charges. You need to choose any Demat accounts per your needs and requirements.
To open a Demat account, you must submit some essential documents. Following is a compiled list of required documents: Proof of identity with a photo, Proof of residence, Proof of bank account, and Proof of Income.
Fees and Charges Associated With a Demat Account
Many depository participants (DPs) in India allow the opening of Demat accounts. There are fees and charges associated with Demat accounts on every platform.
Demat account fees and charges vary from one platform to another. It is better to understand the nature of their services and make your decisions accordingly.
IIFL Securities is one of India’s leading stock market exchanges, with 4 million customers. It allows you to open a Demat account in a hassle-free way. However, on this platform, some charges include GST (in Rupee) for every service.
- There is INR 295 as the account opening fee.
- Annual Maintenance Charges (AMC) are zero for the 1st year
- Dematerialization of share certificates INR 17.7 for every certificate
- Rematerialization of share certificates is INR 17.7
- For conversion of Mutual Fund units, you will not have to pay
- For Destatementization, there is a zero fee
- You will have to pay nothing for the Reconversion of Mutual Fund units into a Statement of Account.
- There is INR 0 for Redemption/Restatementization
- Postal charges are INR 47.2 for every request.
A Demat account allows you to easily and quickly invest in the stock market. With the Demat system, you will get a streamlined share trading process. As per SEBI (Securities and Exchange Board of India), having a Demat account is mandatory to participate in the share market.
What is Share Market, and How Does it Works?
The share market is a marketplace that allows buyers and sellers to come together to buy and sell publicly listed shares during trading hours on a particular day. In the stock market in India, not only you can trade shares but also various securities such as bonds, derivatives, forex, etc.
You may wonder now what is the differences between the share market and the stock market. Simply put, the share market allows you to trade only shares, while the stock market allows you to trade a wide variety of securities. The National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) are India’s two major stock exchanges. To understand efficiently what is share market and how it works, then you must two types of share markets exist in India, such as primary markets and secondary markets.
Primary Markets
The primary market refers to a source of new securities. It is the place where any security is created for the first time. Then, the company offers new security for sale to investors through a stock exchange to raise capital.
Secondary Markets
The secondary market refers to a market that allows investors and traders to buy and sell securities from each other.
Conclusion
The stock market in India allows you to invest and generate significant returns using a Demat account. A Demat account is affordable to open with IIFL Securities and easy to participate in the Indian stock market. IIFL Securities allows you to invest in a wide variety of securities such as IPOs, Commodities, Derivatives, Equities, etc.
