What is a Demat account?
                     What is a 
Demat 
account?
Introduction
A Demat account is primarily used to electronically hold 
securities and shares. The concept was first introduced in the 
country in the year 1996 as an alternative to physical share 
certificates. 
A Demat account not only makes share trading quick and 
easy, but also eliminates all of the risks and problems 
associated with physical share certificates.
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What is a Demat 
Account?
A Demat account is also known as Dematerialized account. In 
other words, converting or dematerializing your physical 
shares in the electronic format is known as holding a Demat 
Account. 
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Types of Demat 
accounts
• Regular Demat accounts: These are dematerialized accounts 
for residents of India. If you’re an India resident primarily 
dealing with equity trading and investment, you’ll find the 
regular Demat account ideal.
• Repatriable Demat accounts: This is one of the two types of 
Demat accounts available for non-resident Indians.
• Non-repatriable Demat accounts: If you’re a non-resident 
Indian, you can also choose to open a non-repatriable 
account.
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Dematerialization
 National Securities Depository Limited (NSDL) brought in the 
concept of Demat accounts, which could be used to 
electronically store shares and securities of companies. If you 
own physical shares, you need to convert them to electronic 
records before being able to use a Demat account. This 
process of conversion is what is commonly known as 
dematerialization.
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Depositories
A depository is an organization or an entity that helps store 
financial assets electronically, so traders and investors can 
buy, sell, or hold them. In India, there are two depositories 
that are responsible for maintaining all of the Demat accounts 
in the country. These are:
• National Securities Depository Limited (NSDL)
• Central Depository Services Limited (CDSL)
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How does Demat 
Account Work?
Buying of stocks in the share market can be done only 
through a trading account. Meanwhile, a Demat account is 
used to hold the shares bought through the trading account. 
Therefore, in order to realize the full potential of a Demat 
account, it is imperative to link it with a trading account.
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Features of Demat 
Account
Share transfer: Transferring your shares is extremely easy 
with a Demat account. You only need to send in a duly signed 
Delivery Instruction Slip (DIS) to your depository participant 
to transfer your shares.
Loan collateral: You can pledge the securities you hold in a 
Demat account and use them as collateral for securing a loan 
from a financial institution.
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Features of Demat 
Account Cont.
Temporary freeze: You can temporarily freeze your Demat 
account for a specific duration. However, this feature is 
generally only made available if you hold a specific number of 
shares in your account.
Quick transfer of benefits: Best Demat accounts offer a swift 
transfer of benefits such as dividends, bonus issue of shares, 
stock splits, interest, and refunds.
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Benefits of a 
Demat Account
• Swift settlements and deliveries
• Increases share trading volume and market participation
• Increases transparency
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Benefits of a 
Demat Account 
Cont.
• Eliminates paperwork
• Quick and easy communication with investors
• Little to no risks involved
• Builds trust and increases investor confidence
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