Demat Account Basics

by

Darpana Sharma

The emergence of Demat account in India is relatively recent as compared to its introduction in other parts of the world. Demat, an abbreviation for Dematerialized account, is also known as DP account and is meant for holding the securities electronically instead of holding it physically. Even then, only 2% of the population currently possess a demat account, while the rest still prefer to hold physical evidence of their securities.

The functioning of Demat account resembles that of a bank account. A bank account is meant for depositing and withdrawing money. Similarly, demat account is for withdrawing and depositing stocks, bonds, NSCs and debentures. Some of the benefits of Demat account include: In case you wish to redeem the debentures or sell the shares in your demat account, you can transfer it quickly and conveniently without requiring any to incur extra costs or paper work. You just need to sign a Delivery Instruction Slip that works like a cheque book. When you are holding physical share and bond certificates, you stand a chance of losing its by way of theft, mutilation, etc. Thus, if you hold your securities in a demat account, you will do away with all the disadvantages of physical possession. In short, maintaining a demat account helps in preserving securities securely and safely. Other than that, demat account has to be linked with your bank account to carry out various monetary transactions successfully. Hence, all the redemption proceeds will automatically be credited to your account. Having a Demat account is also beneficial in other ways. For instance, in case of residence change, is you are a demat account holder, all you need to do is intimate your Depository Participant (DP) in writing and your new address information would reach all the companies you have invested in. It is mandatory to open a demat account for online security trading. You will need any of the following documents: — PAN Card — Proof of residence (Address proof) You can provide any one of the following for this: — Driving license — Voter’s ID — Passport — Photo credit card — Photo ration card — Utility Bill (Telephone, Electricity etc) — Bank Statement — Proof of identity – You can provide any one of the following for this: — Driving license — Voter’s ID — Passport — Photo ration card — Two photographs

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Demat Account Basics