Nowadays, money is an asset for fulfilling needs. It makes you financially independent and allows you to invest in different financial instruments. With so many unpredictable circumstances around the corner, it is essential to secure your future. You should invest at least 20% of your income in Mutual Funds, Stocks, Debt Funds, or other asset classes.

Demat Accounts electronically hold securities and shares and are mandatory in India. Introduced in 1996, they are an alternative to physical share certificates. They make Share Trading quick and eliminate all problems associated with physical shares. You can use them to store various investments, including Equity Shares, Bonds, Mutual Funds, Debt Securities, Government Securities, and others.

Organizations

National Securities Depository Limited and Central Depository Services Limited maintain the Dematerialisation Accounts in India. Previously, you used physical share certificates for trading, which became difficult to store. They were prone to damage and forgery. To eliminate these problems, the NSDL introduced this account to dematerialize share certificates.

Working

Buying Stocks in the Share Market is possible only through the Trading Account. It is imperative to link both accounts to realize their full potential. When you place a buy order, the Depository Participant forwards your request to the stock exchange.

The stock exchange matches your ‘buy’ request with a ‘sell’ one and orders clearance houses to settle the trade by debiting the specific number of shares from the seller’s Demat and crediting it to your account at the closure of the Share Market.

Process

The dematerialization process is simple. With digitalization, you can open a Demat Account online with a Depository Participant. They are either an agent or registered stockbroker. A depository is an institution holding your securities through the DP and providing related services. After activation, you must send your DP a duly filled Demat request form with your physical share certificates.

They process your request by sending your share certificates back to the company. Your DP also sends a request to the company’s appointed Registrar and Share Transfer Agent through the depository. Upon approval, the company share certificates get destroyed. The depository receives the dematerialization confirmation, relays it to your DP, and credits the shares.

Eligibility

Hindu Undivided Families, resident Indians, non-resident individuals, partnership firms, and companies are eligible for opening Demat Accounts. Minors are also suitable but require a parent or guardian’s operation until they become adults.

Conclusion

The account opening procedure takes about 14 days. You can use it to trade shares and securities and invest in the Indian Stock Market without worrying about share certificate loss or damage.