Demat account

From Wikipedia, the free encyclopedia

A demat account (short for dematerialized account) is a necessary account that holds financial securities (equity or debt) digitally and to trade shares in the share market. In India, demat accounts are maintained by two depository organizations: the National Securities Depository Limited and the Central Depository Services Limited. A depository participant (DP), such as a bank, acts as an intermediary between the investor and the depository. In India, a DP is described as an agent of the depository. The relationship between the DPs and the depository is governed by an agreement made between the two under the Depositories Act. The demat account number is quoted for all transactions to enable electronic settlements of trades to take place. Access to the dematerialized account requires an internet password and a transaction password. Transfers or purchases of securities can then be initiated. A security is a tradable financial asset; the term commonly refers to any form of a financial instrument, but its legal definition varies by jurisdiction. Purchases and sales of securities on the demat account are automatically made once transactions are confirmed and completed.

Types of demat accounts[edit]

There are three types of demat accounts offered by depository participants:[1]

  • Regular demat accounts
  • Repatriable demat accounts
  • Non-repatriable demat accounts

Fees[edit]

There are four major charges usually levied on a demat account: account opening fee, annual maintenance fee, custodian fee and transaction fee. Charges for all fees vary by depository participant.

Account-opening fee[edit]

There may not be an opening account fee. Private banks do not have one, but other entities do impose an opening fee.[2]

Annual maintenance fee[edit]

This is also known as folio maintenance charges, and is generally levied in advance.[3] It is charged on an annual or monthly basis.

Documents required[edit]

Opening a demat account requires providing documents that fulfill the requirements of Know Your Customer.[4] A contract with a stockbroker does not have to be signed. Generally the documents required are:[citation needed]

Transfer of shares between depository participants[edit]

To transfer shares, an investor has to fill one of two kinds of depository instruction slips. The first check is made whether both demat accounts are at the same depository[clarification needed]. There are two depositories: Central Depository Service and National Securities Depository.[5]

References[edit]

  1. ^ "About Demat Account". India Infoline.
  2. ^ "Everything about demat account fees and charges". Moneycontrol. Retrieved 2020-05-02.
  3. ^ "Everything about demat account fees and charges". Moneycontrol. Retrieved 2020-05-02.
  4. ^ "How to open demat and trading account online". The Economic Times. Retrieved 2021-04-06.
  5. ^ Demat, Guide (9 August 2018). "Depository in India". Traders Pit.

External links[edit]