What is Demat Account
Demat Account works like a bank for your shares, government bonds, and mutual fund. Stock in accounts remains dematerializes. It is a process that converts physical shares certificate into electronic format. This account functions like a bank account for holding money and other activities done in passbook. Dematerialization of certificate makes it easy and accessible from anywhere. Similarly, securities too are held in electronic form and are credit debit accordingly. Another important update about this account is that its account can be open with zero balance.
As it is a paperless transaction, hence it has made life simpler by avoiding all manual processing. Following are the benefits of dematerialized account system:-
Holding a share in physical form involves lots of paperwork, a risk of fake shares and other long processes. So for trading and investing, Demat account is must required to trade in India’s stock exchange. However, SEBI has allowed traders to settle up to 500 shares in physical form but this option is not preferably anymore. It holds the certificate of financial instruments like MF, bonds, government securities etc.