A demat account is a type of account used to hold financial securities (equity or debt) digitally and to trade shares in the share market. It is an Indian term for a dematerialized account, which means that the securities are held in electronic format instead of physical certificates. Access to the dematerialized account requires an internet password and a transaction password which allows the transfers or purchases of securities. A demat account provides a digitally secure and convenient way of holding shares and securities, eliminating theft, forgery, loss, and simplifying the process of holding investments such as shares, bonds, government securities, mutual funds, and exchange-traded funds.
There are three types of demat accounts offered by depository participants: regular demat accounts, repatriable demat accounts (allows foreign funds and transfers abroad), and non-repatriable demat accounts. There are four major charges usually levied on a demat account: account opening fee, annual maintenance fee, custodian fee, and transaction fee.
In India, a demat account is a prerequisite for stock investment. When you buy and sell exchange-traded funds, bonds, mutual funds, or shares in India, all of the securities transactions you make are stored in your demat account. A demat account holds all the investments an individual makes in shares, government securities, exchange-traded funds, bonds, and mutual funds in one place, making share trading easy for the users during online trading.
