A Demat account (short for Dematerialized account) is a type of account used in India to hold shares and securities in electronic (digital) form instead of physical paper certificates. It is an essential part of the modern stock trading and investing system in India.
A Demat account allows investors to store and manage their stocks, mutual funds, bonds, ETFs, and other financial instruments electronically, similar to how a bank account stores money.
When you buy shares, they are credited to your Demat account, and when you sell, they are debited. It eliminates the need for physical share certificates and reduces the risk of theft, forgery, damage, or loss.
Feature | Description |
---|---|
Electronic Storage | Stocks and securities are held in digital form. |
Safe & Secure | Eliminates risk of physical damage or theft of certificates. |
Easy Transfer | Quick and seamless transfer of securities. |
Integration with Trading Account | Usually linked with a trading account for buying/selling. |
Portfolio Management | Helps investors track their holdings and portfolio easily. |
Nomination Facility | Allows naming a nominee to inherit holdings in case of death. |
NSDL (National Securities Depository Limited)
CDSL (Central Depository Services Limited)
These two are the central depositories in India that hold all securities in dematerialized form. Demat accounts are opened through Depository Participants (DPs), who are agents of NSDL or CDSL.
Type | Who It's For |
---|---|
Regular Demat Account | For Indian residents. |
Repatriable Demat Account | For NRIs who want to transfer money abroad (requires NRE bank account). |
Non-Repatriable Demat Account | For NRIs but funds can’t be repatriated (requires NRO bank account). |
Opening the Account:
You approach a DP (like a broker) and open the Demat account by submitting documents (PAN, Aadhaar, bank details, etc.).
Buying Shares:
You place a buy order using your trading account.
Once the transaction is complete, shares are credited to your Demat account in T+1 day (as per new SEBI rules).
Selling Shares:
You place a sell order.
The shares are debited from your Demat account and sold through the stock exchange.
PAN card (mandatory)
Aadhaar card or other address proof
Passport-sized photographs
Bank account details
Signature (on paper or digitally)
No physical paperwork
Fast settlement of trades
Reduced risks (loss, theft, damage)
Easy monitoring of investments
Enables IPO investments and mutual funds
Can pledge securities for loans
Charges like AMC and transaction fees apply
If inactive for long, account may be frozen (can be reactivated)
Requires internet/mobile literacy to manage online