Beginners guide: What is a Demat Account?

by khalid on 10/10/2011 · 0 comments

In the year 1992 SEBI i.e. Security Exchange Board of India had been appointed by the government to take care of ever transaction of securities over the exchange. The head office was Mumbai. The primary function of the entity is to help the stock exchanges and the securities being traded over. It is also responsible to monitor as well as regulated both the stock exchanges of the country.

Demat account is a short form of Dematerialization which is a process the shareholder does not require to hold a security in the physical form but it is converted in an electronic format which is maintained on an account with a Depository participant. A DP can be an organization that is involved in business of providing financial services such as banks, brokers, etc. DP’s are also referred to as agents. These depositories are organisations who are also responsible to maintain the investor’s securities in the electronic form. Currently in India there are two such organizations namely:

  • National Securities Depository Ltd. (NDSL)
  • Central Depository Services India Ltd. (CDSL)

In case an investor wants to open a Demat account he could directly go and enrol with any DP to open an account.  It is as easy as opening a savings banks account. Similar to the requirement of bank accounts for saving money, depositing cheques, etc. With a demat account an investor can buy sell stocks in the share markets and hold it in an electronic form.

Bell the Bull says: Demat account is a primary need before you think of purchasing a share as they are the place where they are stored electronically

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