What is Demat Account? Meaning, Documents & Benefits

A Demat account is an account which allows you to hold shares in an electronic format. This account allows you to buy and sell shares electronically. While earlier investors were issued shares in physical format, the practice was stopped after the introduction of Demat accounts. Let’s learn more about this account.

A Demat account is akin to a savings account of a bank which holds securities instead of money. The documents you need to open this account are:

• Proof of income
• Proof of identity
• Proof of address

• Select the Depository Participant (DP) with whom you would like to open the account
• Fill up the account opening form with all the relevant documents
• You are provided with a copy of the rules and regulations and you need to pay the required charges
• During in-person verification, a DP representative would contact and verify all the details provided
• After processing of application, you would get an account number and ID which is required to operate the account online

• Low risk Physical keeping of share certificates is risky. It’s prone to theft, losses and damages. In the past, there have been cases of issuing of fake certificates. These types of risks are eliminated with a Demat account since everything is in electronic format.
• Instant transfer of share Previously, transferring shares was a cumbersome process. If the shareholder wanted to transfer shares, it had to be sent to the registrar or to the company who then transferred it in the name of the new person. The process took more than a month and often the physical certificates were lost.
  However, with a Demat account, shares can be transferred instantly and hassle-free.
• Can sell a single share Before the advent of Demat account, individual shareholders were not able to sell shares in odd lots. For example, it was tough for shareholders to sell 33 shares, which is an odd figure and not in marketable lots like 100, 200 etc. Today, with a Demat account, you can sell even one share, if desired.
• Multiple access options This is another benefit of a Demat account. As it’s operated electronically, you can operate it through computer, mobile phone and any other electronically hand-held device. At the same time, you can operate a Demat account from anywhere you wish to – home, office, etc.

Also, the shares and securities in your Demat account can be pledged for a loan. You can use them as collateral for securing a loan from bank or other lending institutions.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.