What is Demat Account

by Shakti Singh Dulawat on January 27, 2009

Today we will talk about demat account,Demat – means a material is dematerialized. Here the demat mean the documents of shares that is in paper form will be demated and will be kep electronically in an account. This account is opened at many banks and majority of stock brokers. Your own bank where you have a savings account, they too may have this facility please ask them. Anyone who is holding the shares can open this account.

In India, a demat account, the abbreviation for dematerialized account, is a type of banking account which dematerializes paper-based physical stock shares. The dematerialized account is used to avoid holding physical shares: the shares are bought and sold through a stock broker.
This account is popular in India. The Securities and Exchange Board of India (SEBI) mandates a demat account for share trading above 500 shares. As of April 2006, it became mandatory that any person holding a demat account should possess a Permanent Account Number (PAN), and the deadline for submission of PAN details to the depository lapsed on January 2007.

How to Open Demat account
DEMAT account helps you to hold the shares in Electronic Format. To open a DEMAT account, it does not matter whether you are a salaried person or not. It is better to open a Trading and Demat account with the same company, so that when you trade shares, the Demat account automatically gets updated for Buy and Sell. You may contact Reliancemoney, Sharekhan, ICICIdirect etc., as per your convenience.

Is a demat account a must
Nowadays, practically all trades have to be settled in dematerialised form. Although the market regulator, the Securities and Exchange Board of India (SEBI), has allowed trades of upto 500 shares to be settled in physical form, nobody wants physical shares any more. So a demat account is a must for trading and investing.

Required Documents for Demat account
- A canceled check(MICR)
- Proof of Identification
- Proof of Address
- Proof of Pan card (mandatory)
- Recent photographs, one and, or more

Benefits of Demat account
- A safe and convenient way to hold securities.
- Reduction in paperwork involved in transfer of securities.
- Reduction in transaction cost.
- Nomination facility.
- Transmission of securities is done by DP eliminating correspondence with companies.
- Holding investments in equity and debt instruments in a single account.

Now days demat account provide facility for buy sell mutual fund,stock,insurance,ULIP etc.
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