Demat Account – An Insight
Dematerialization or DEMAT is the transformation from physical certificates to convenient electronic bookkeeping. A demat account possesses all the shares you buy in dematerialized or electronic form. Essentially, a demat account is to one’s shares whatever a bank account is to his/her money.
The Demat account is that type of account in which each share and security are kept electronically. The procedure of converting Shares into Electronic Form is termed as Dematerialisation.
Work Structure of Demat Account
Central Depository: Two depositories are present in India and they are NSDL and CDSL. They possess each and every demat account. The central depository possesses details involved with the shareholding on that person’s behalf like banks.
Unique ID: Each of such account is involved with a distinctive number for the sake identification. This number you should provide for transactions. The number is going to help the companies and exchange to recognize you as well as credit the shares in your account.
Depository Participants: Depository Participants or DPs provides access to the central depository. They play a role as the mediator between the investor and the central depository. DPs might be banks, financial institutions or brokers that are authorized to provide demat services.
Portfolio Holding: The demat account possesses all your securities. Therefore, whenever you scrutinize your account, you can view your portfolio holding along with its details. They are automatically updated each time you run a transaction – it may be purchasing or selling a security.
Technology has brought about a radical change in the daily lives and stock markets also have not been leftuntouchedby this change. In the year 1875, the Bombay Stock Exchange started its journey with an open shout floor trading exchange.
Traders used to stand on the floor and shoutstocks’ prices for purchasing and selling. It was involved with a large amount of paperwork. The trade agreementssettlements took time due to the requirements of delivering the share certificates.
Many things have been changed since that period. In the year 1996, dematerialization was welcomed in this field.
Dematerialization – Benefits
Common Bank: Dematerialization is not only about shares, but it is also involved with debt instruments like bonds. Now, a person can possess all of his/her investments in a single account.
Automatic Update: As it is a common account, you need not continue providing all of your details including addresses every time you make a transaction or every time you alter the details. Such details are made available automatically to establishments you have made the transaction with.
Odd-Lot Problem: Earlier, the transaction of shares were performed in lots. The transaction of a single or odd number of securities was not possible. Now, this problem has been eliminated.
Various broking firms are available that are offering the incredible facility of opening free demat account.
If you have any type of queries and questions, then you can consult an experienced professional in this field or you can refer to the reliable websites. You need to analyze each and every aspect in this regard.