Hello friend, I am Arpit your friend. Today I going to show you what is demat and trading account, why these accounts are required to do a trade, Friends whenever you want to invest in the stock market you need demat account.
The demat account is like a bank account, the only difference is that there is a transaction of money in the bank account. Whereas shares are traded in a demat account. Just like money are safe in the bank account, shares are safe in the demat account.
To invest in the share market, demat account is required, Apart from the shares in demat accounts, mutual fund units, debentures, bonds, and government securities can also be held. The demat account is also called Beneficial Owner or BO. The demat account opens by the bank, broker or financial institution.
SEBI has approved 2 depository NSDL and CDSL for Demat Account. There are several Depository Participants (DPs) below NSDL and CDSL. The DP should be registered with one of these depositories. The demat account can be opened to any registered DP. Bank, broker, financial institutions can also deposit depository services.
The process in which shares stores in the form of electronically is called “demat”, the full form of demat is “Dematerialize”. In the process of securities (share) converting in physical form is called “Dematerialization”.
According to SEBI guidelines, shares can’t be sold or bought in any other form other than demat. Therefore, if you have to buy or sell a stock in the stock market, then it is mandatory to have a demat account.
How does it work?
When you buy a stock, the broker credits the stock in the demat account and it appears in your holdings details. If you do business with an internet-based platform, you can view your holdings online. In particular, the broker shares the shares on T + 2 which is trading day + 2 days later. When you sell shares, you have to give delivery instructions to your broker, in which you have to fill in the details in the stock sold. The stock gets debited in your account and you pay the money for the shares sold. If you pay from the internet, the debit of shares and a credit for the amount in your account automatically appears.
There are two depositories in India - National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL), by which shares are held by various Depository Participants. The advantages of opening a demat account are no problem in holding shares in physical forms. There is no dilemma and you can buy and sell a stock in it too. There is no stamp duty on the transfer. No transfer deed is necessary. You can also see these sites https://nsdl.co.in/ and http://www.cdslindia.com/ of NSDL and CDSL.
Be sure to keep these things in mind before opening an account. An account where someone can hold his / her shares and his security is electronically called a demat account. If you have to buy or sell shares in the stock market in India, then the demat account is mandatory. In addition, if you have to apply your shares to the Initial Public Offering (IPO), you also have to have a demat account.
Read this 6 special things in the slider –
There are two depositories in India: National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL), by which shares are held by various Depository Participants. Depositories have security like shares, debentures, bonds, government securities, mutual fund units etc.
Depository participants are mediators between investors and depositories. In order to avail any services from the depository, the investor needs a Depository Participant. The original services can be transferred to the Demat Account individually or in advance available Demat Account. If the holdings of your demat account such as securities, stocks, mutual funds, bonds are less than 2 lakhs, then you can convert it to your available account. Those customers whose holdings do not get the convenience of conversion from 0 rupees to 50,000 rupees. Apart from this, if there is a holding between Rs. 50,001 and Rs 2 lakh, then Rs 100 has to be paid in conversion. Charges involving charge and fees vary according to different institutions and this depends on how much the account is and how much the amount is to be transferred. Account opening charges, annual maintenance charges, transactions or brokerage charges are some charges which are included in the demat account. There is no problem in holding shares in physical forms. There is no dilemma and you can buy and sell a stock in it. There is no stamp duty on the transfer. No transfer deed is necessary. Non-metallization. The process of converting your physical shares into electronic form is called non-translationalization.
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