When talking about shares, the best ways to hold it is by having a demat account. It is a great way to hold all your securities in the easy and secure way. It further eliminates the risk of any theft, loss, damage or forgery of the certificates.
What is Demat Account?
It is basically an account which is used to hold all the shares in dematerialised or electronic form. It is just the same as any other accounts. A demat account does the job of holding all the certificates like bonds, shares, government securities, exchange-traded funds, mutual funds and more. An individual cannot trade in a stock market, unless, a person has a demat account. Upon approval, all shares and securities are transferred to your demat account directly. All the information regarding your demat account is readily available online by logging into your account. So, instead of physical possessing of all the important documents, it is wise to have a demat account.
Types of Demat Account
There are two major types of demat accounts:
Repatriable Demat Account – In this, the repatriable funds are deposited in another bank account like Non-Resident External (NRE) account. The funds in this account can be transferred abroad. All the investments done using these funds are maintained in the Repatriable demat account.
Non-Repatriable Demat account – The non-repatriable funds are deposited in a separate bank account, majorly Non-Resident Ordinary Rupee (NRO) account. These funds cannot be transferred abroad. All the investments done from these funds are deposited in your non-repatriable demat account.
Working on the Demat Account
Trading through demat account is same as physical trading. The only and major difference is that it works through electronic means. Through your online trading account, you can place an order to begin trading. For the same, it is important to link demat and trading account. The exchange will process the order only when the order is placed. Before final processing, the order, the demat account details, availability of the shares and market price of shares is verified. Shares are further reflected in your holding’s statement once the process is completed. In case, the shareholder wants to sell the shares; it is vital to provide the delivery instruction with stock details. Furthermore, the shares are debited and your trading account is credited with the equivalent cash amount.
Opening A Demat Account
When it comes to opening a demat account, it is vital to fill up the account opening form along with the required documents like PAN card as identity proof, existing financial balance sheets, a copy of residence proof and passport size photograph. For verification, it is wise you carry the original documents too. Typically, it takes a week or two to open the account. But, the period can extend to 15-20 days if the processing is taking longer than expected.