What is Demat Account, its Meaning, Type and Process
Demat account builds a core relation between a broker and a trader. Opening a Demat account online is a must, along with a trading account, for you to enter the share markets for buying and selling the shares and other securities. To do this efficiently, you need to be aware of the concept of a Demat account, trading account and types of Demat account. Knowing these will ensure that the securities traded at the correct frequency.
What is a Demat account?
Demat is a short form used for referring to Dematerialized, which means that the securities kept in an electronic format. These securities are stored not only securely but also conveniently. Before introducing the Demat account in 1996, traders faced many inconveniences of physical copies of shares certificates that had to be verified at each point of transaction. Trading was both tedious, and a process is happening at a slow speed due to the heavy management need for the securities. The Demat account eliminated the hassles to a great extent.
The different types of Demat account are classified as per additional requirement. They are-
1.Repatriable Demat account:
This is for the non-resident Indians who wish to open a Demat account for trading in Indian securities. The repatriable version allows a trader to transfer funds to another country. Thus, it would help if you had an association with the NRE (non-resident external) bank account to proceed further with the dealings.
2.Regular Demat account:
The regular account is for any Indian resident willing to open a Demat account for trading in securities within India.
3.Non-repatriable Demat account:
The non-repatriable Demat account is specifically for the NRIs (non-resident Indian). The funds here cannot be transferred to other countries like it can be done in the repatriable account. To use this type of account, the applicant needs an association with an NRO (non-resident ordinary) bank account.
The different types of trading account are as follows:
1.Equity trading account
An equity trading account is a go-to account for trading in options, futures and equities. Through this account, Currency derivatives can also be traded. However, the equity trading account cannot be used for trading commodities, so a different type of account exists for this purpose.
2.Commodity trading account
As the name suggests, a commodity account allows an investor or trader to trade in commodities like coffee, wheat, bananas, etc. Advantages of using a Demat account:
Demat account has made a significant impact in trading shares and other securities due to the latest technological developments it carried over with its existence. The following are the advantages of using the Demat account-
- Cost reduction: using a Demat account for trading is much more cost-effective than the traditional trading methodology followed before introducing dematerialization. This account also allows a transaction of higher frequency to be conducted electronically
- Accessibility: the securities are traded safely and securely through trading account and Demat account. The central control provided by the Demat technology makes it easily accessible from any place at any time
- Quicker transaction: Trades can occur within a matter of minutes or even seconds due to the electronic nature of the securities
Disclaimer: ICICI Securities Ltd.( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288 2470. Please note, loans related services are not Exchange traded products and I-Sec is acting as a distributor to solicit these products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon.