A dematerialized account or a demat account serves as a key instrument for holding shares and securities and as such, offers numerous benefits. These features, services and benefits of a demat account come with its nature of being the basic mode of electronic retention, storage and exchange of shares and securities.
A demat account can be easily opened online with listed documentation and minimal paperwork. This allows you, as an investor to carry out your commercial activities in a smooth and hassle-free manner. You get to invest, hold, track and trade in your fund securities and shares electronically, thereby increasing information security and ease of operation.
In the earlier mode, when the bulk of operations were carried out through detailed forms, paperwork, certificates, ledgers etc., the entire spectrum of dealing in shares and securities was highly complex and cumbersome. The market always works in sync with the general commercial scenario and as such, there was a set of detailed protocols involving permissions, registrations, licensing etc. that added to the bulk of voluminous procedures.
However, as Indian markets opened up after disinvestment of the early 90s, a major requirement was felt in the general administrative set up regarding the way shares and securities were being dealt with in Indian markets.
This churning of ideas and need for having a transparent system based on accountability and dematerialization led to the passing of Depository Act in 1996. Electronic share storage was a novel concept and it found important takers in India.
This is how the basic dematerialized account, or demat account system became operational with its features of security, simple operation and cost effectiveness.
Feature, Services & Benefits:
A demat account comes with many different features, services and benefits. The major among these are as follows:
#1 Smooth and easy holdings:
Holding shares and securities comes with various authorizations, certification etc. and was a highly complex task previously. However, a demat account eliminated unnecessary paperwork and yielded efficiency in a simple manner.
With a demat account, there is no need of any lengthy documentation, certification, etc. and the entire procedure becomes investor friendly.
#2 Costing involved:
On account of minimal paperwork and elimination of stamp duties etc., the overall costs involved in setting up and maintaining a demat account are extremely low. The various brokerage platforms that offer services for opening of a demat account provide varied options.
There are platforms like Tradebulls, which do not charge any additional fee and guide the investor in an easy manner for setting up a demat account. Apart from a low annual maintenance fee and a monthly transactional fee, there are no added charges.
#3 Security of operations:
Earlier, when a lot of paperwork was involved, there were additional issues like forgery or theft etc. Besides, there was also the concern regarding misplacing or damages etc. as important documents, information etc. was in paper form.
However, with demat account, all these issues have been put to rest and there is convenience of operation. Being electronic in nature, full security of information, certificates etc. is ensured and there is no room for any malpractices.
#4 Quicker transfer of shares:
Unlike a physical holding, a demat account offers much quicker transfer of shares. As an investor, you can instruction slips for delivery or receipt of shares digitally.
This not only means that the time involved is much less but also makes the whole procedure very flexible and investor-friendly.
#5 Dematerialization:
The options for dematerialization of shares are highly beneficial. The investor can get in touch with the brokerage platform (called depository participant) and can easily switch the shares from a physical form to electronic one and from electronic to a physical one.
A demat account, thus provides complete flexibility for the benefit of the investor.
#6 Safety against undue credit or debit:
As an added feature, an investor can opt for stopping the operations of a demat account for a fixed period of time. This feature is generally availed to protect against any undue credit or debit and is known as “freezing” The freezing feature of a demat account makes it ideal for fund/deposit safety.
A platform like Tradebulls offers completely guided consultation for setting up of a demat account and offers hand-holding services to the investors for streamlined procedures.