What is DEMAT account and for what it is used for?
Some questions arise after listening the term "demat" like.... What is DEMAT A/C and for what it is used for ? Also the function of this type of A/C.
Answer with detailed information :
The term Demat is known as Dematerialisation . Dematerialisation means the process in which Share Certificates and other securities in the physical form are converted into Electronic form. Demat(dematerialisation) helps in eliminating the problem of physical handling of securities. When the shares and other securites are dematerialisation their account are kept and maintained in the Demat account of Depository Participants. These Depository Participants(DP) are authorised agents to operate Demat Account. These DP acts as an agents between the investors and the company. The process of Dematerialisation takes about thirty days.
The procedure to be followed to open a Demat account is below:
1. Account Opening Form: A person to open a Demat account has to fill the account opening form.with the form he needs to give a copy of PAN card, residence proof, photos etc.
2. Sign the agreement:
The aggrement contains certain rights and regulation. The investor has to then sign it and submit it to DP and the DP charges certain fee and would give a copy of signed aggrement to the investor.
3. Client ID: The DP would give the Client ID once the investors depository account is opened. These numbers are unique.
4. Instruction Slips: the DP would give the account holder the pre-printed instruction slips for depository services. The investor has to keep it safe.
5. Dead Lines: The DP would give the account holders a list of dead lines for giving instruction for various depository services such as transfer , purchase etc.
The importance are as below:
1. Time saving: In case of transfer of shares in physical form requires about more than 1 month, but dematerialised form takes only 4-5 days.
2. Liquidity of shares:
Cash can be easily recieved by selling the securities in case of Demat System.
3. Reduction of cost: when the procedure of transfer is simplified then less time is required and so, the cost is reduced.
4. Suitable for Globalisation: As we can see there is increase in Foreign Investors in Indian Stock Markets. So it becomes easy to use the Demat System by foreign investors.
In simple terms.......
Demat account.
What is it?
It is called dematerialisation. The shares you buy instead of carying the products in physical form it will be carried in paper form like certificates, nowadays it is sent as email by the broking companies. we cannot have direct account in bombay or national stock exchanges. we can indirectly have the account through broking companies.
How to open demat account?
Approach a nearby broking company like sharekhan or banks like HDFC, ICICI bank. You must have a pan card before opening the account. you must have a savings account in bank. when you have both of these you can approach a broking company. they will ask pan card, savings account, identity and resident proof, and some signatures.It will take 15days to 1month for opening a demat account.
you can open either an account which could be operated by broking company or online could be operated by you. once account is opened you can trade in equity. Most of the popular broking company now opening account free of cost. but before opening the account select the broking company with lowest brokerage.
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