Demat refers to a dematerialised account. Demat account is just like a bank account where actual money is replaced by shares. A Demat Account is required to buy or sell stocks.
A Demat Account holds portfolio of shares in electronic form and obviates the need to hold shares in physical form.In India, the government has mandated two entities –National Securities Depository, or NSDL, and Central Depository Services (India), or CDSL – to be the custodian of dematerialized securities.As of April 2006, it became mandatory that any person holding a demat account should posses a permanent Account number (PAN) .
Procedure for getting Demat account:-
1.Fill demat request form (DRF) (obtained from a depository participant or DP with whom your depository account is opened).
2.Deface the share certificate(s) you want to dematerialise by writing across Surrendered for dematerialisation.
3.Submit the DRF & share certificate(s) to DP. DP would forward them to the issuer / their R&T Agent .
4.After dematerialisation, your depository account with your DP, would be credited with the dematerialised securities.
ADVANTAGES OF DEMAT ACCOUNT
- A Demat Account offers a secure and convenient way to keep track of shares .
- It provides the immediate transfer of securities.
- On transfer of security there is no stamp duty .
- Cost reduction on transcation .
- Nomination facility is available .
- Reduction in paperwork involved in transfer of securities .
- Elimination of risks associated with physical certificates such as bad delivery, fake securities, delays, thefts etc.
- Any change in address recorded with DP gets registered electronically with all companies in which investor holds securities eliminating the need to correspond with each of them separately.
- Transmission of securities is done by DP eliminating correspondence with companies
- Automatic credit into demat account of shares, arising out of bonus/split/consolidation/merger etc.
- Holding investments in equity and debt instruments in a single account .
- You will receive the statement of account of your transactions/holdings periodicaly .