What is a Demat A/c?

What is a Demat A/c?
Investors who wish to trade in the market need to have a dematerialized, or demat, account. In India, the government has mandated two entities –National Securities Depository, or NSDL, and Central Depository Services (India), or CDSL – to be the custodian of dematerialized securities.

• 5.1 What do you mean by dematerialization?
  Dematerialization is the process by which physical certificates of an investor are converted to an equivalent number of securities in electronic form and credited in the investor's account with its DP.
• 5.2 Can I dematerialize any share certificate?
  You can dematerialize only those certificates that are already registered in your name and are in the list of securities admitted for dematerialization.
• 5.3 What is a depository?
  A depository can be compared to a bank. A depository holds securities like shares, debentures, bonds, government securities, and units, among others of investors in electronic form. A depository also provides services related to transactions in securities.
• 5.4 How can I avail the services of a depository?
  A depository interfaces with the investors through its agents called depository participants, or DPs. If an investor wants to avail of services offered by the depository, the investor has to open an account with a DP. This is similar to opening an account with any branch of a bank in order to utilize the bank's services.
• 5.5 What are the benefits of opening a demat account?
  The benefits of opening a demat account are:
  1. Immediate transfer of securities;
  2. No stamp duty on transfer of securities;
  3. Elimination of risks associated with physical certificates such as bad delivery, fake securities, etc.;
  4. Reduction in paperwork involved in transfer of securities;
  5. Reduction in transaction cost;
  6. Nomination facility;
  7. Change in address recorded with DP gets registered electronically with all companies in which investor
  holds securities eliminating the need to correspond with each of them separately;
  8. Transmission of securities is done by DP eliminating correspondence with companies;
  9. Convenient method of consolidation of folios/accounts;
  10. Holding investments in equity, debt instruments and government securities in a single account;
  11. Automatic credit of shares into demat account, arising out of split/consolidation/merger etc.
• 5.6 How do I select a DP?
  
  1. You can select your DP to open a demat account just like you select a bank for opening a savings account. Some of the important factors for selection of a DP can be:
  2. Convenience - Proximity to the office/residence, business hours.
  3. Comfort - Reputation of the DP, past association with the organization, whether the DP is in a position to give the specific service you may need?
  4. Cost - The service charges levied by DP and the service standards.