Demat Account

                                           [Image source : kotaksecurities.com]

In India Shares and securities are held electronically in Demat account instead of holding it in physical form. It can be opened with any investment broker for the purpose of transacting shares. You will not be allowed to trade in India without this Demat account.

Why Demat?

Any physical securities as held earlier may be lost if you are a wait and watch investor, Demat has made life easy for all the investors. You can control your account online with id and password. All transactions will be recorded in your account and any transaction will be automatically added or deleted in your account. In India went to this paperless trading from 1996 in NSE.

Benefits of Demat

·        Easy and convenient way to hold securities

·        Immediate transfer of securities

·        No stamp duty on transfer of securities

·        Safer than paper-shares (earlier risks associated with physical certificates such as bad delivery, fake securities, delays, thefts etc. are mostly eliminated)

·        Reduced paperwork for transfer of securities

·        Reduced transaction cost

·        No "odd lot" problem: even one share can be sold

·        Change in address recorded with a DP gets registered with all companies in which investor holds securities eliminating the need to correspond with each of them separately.

·        Transmission of securities is done by DP, eliminating the need for notifying companies.

·        Automatic credit into demat account for shares arising out of bonus/split, consolidation/merger, etc.

·        A single demat account can hold investments in both equity and debt instruments.

·        Traders can work from anywhere (e.g. even from home).

[source : Wikipedia]

Fees Involved in Demat opening

Account opening fees depend upon the brokers such as Axis Bank, SBI bank, Karvy consultants, Suhil finance etc. Some offer Demat account for free for the first year and from second year they start charging.

Apart from this account opening fees there are fees charged for transacting in our demat account, they are brokerage charges. Once you open you need to trade or else you will end up paying yearly fees as maintenance charges.

Disadvantages

If the shares are illiquid it is impossible to close your demat account as you are holding it. Even on Dormant account DP’s charge fees so everybody should make sure that they close the account after liquidating all the shares and mutual funds held in Demat form.