Demat refers to a dematerialised account for individual citizens to trade in listed stocks or debentures, required for investors by The Securities Exchange Board of India (SEBI).
In a Demat account, shares and securities are held electronically instead of the investor taking physical possession of certificates. A Demat Account is opened by the investor while registering with an investment broker (or sub broker). The Demat account number is quoted for all transactions to enable electronic settlements of trades to take place.
How to open a Demat Account?
First, You approach a DP and fill up the Demat account-opening form. The account opening form must be supported by copies of the following approved documents:
- Proof of identity
- proof of address
- Pan number (mandatory effective from April 1, 2006)
- Six months bank statement
- Two cheques, one cancelled and one margin cheque
All applicants should carry original documents for verification by an authorized official of the depository participant, under his signature. Further, the investor has to sign an agreement with DP in a depository prescribed standard format, which details rights and duties of investor and DP.
- It's a safe and convenient way to hold securities
- Immediate transfer of securities.
- There is no stamp duty on transfer of securities
- There is a major reduction in paperwork involved in transfer of securities,reduction in transaction cost etc.
- Holding investments in equity and debt instruments in a single account.
- Automatic credit into demat account of shares, arising out of bonus/split/consolidation/merger etc.
- Elimination of risks associated with physical certificates such as bad delivery, fake securities, delays, thefts etc.
- No odd lot problem, even one share can be sold
- Transmission of securities is done by DP eliminating correspondence with companies;