The Indian capital market has witnessed tremendous growth in scale & depth in the last few years regarding listed companies, several stock exchanges, trade volumes of scrips, and investor population. The Indian capital market could break new ground because of the DEMAT account that facilitates the holdings of shares and securities in electronic form.
The process of converting physical shares into electronic form is termed dematerialisation. The digitalized era of computers surpasses the need for shares in certificate form. Dematerialisation/demat accounts make it possible to hold, register, and transfer the securities electronically.
In the earlier era, deals were recorded & the transactions were registered on papers. The demat accounts abbreviated the paper-oriented process involved with the ownership, trading, and transfer of securities & introduced electronic bookkeeping, which further added automatic & speedy updation.
Today, an online DEMAT account is an inevitable need for investors to trade stocks online. A DEMAT account is similar to a bank account; DEMAT accounts hold shares, akin to a bank account holding money.
A Demat Account has Many Advantages Such As:
1. Abbreviated Paperwork
Handling & managing share trading online through a Demat account removes the need to use paper-based documents. This brings effectiveness for companies by lessening the administrative hassles and processing fees.
2. Quick Transfer of Shares
Elimination of paperwork and related steps that could slow down the process of clearing transactions results in faster transactions and also reduces the processing fees while offering higher efficiency in trading.
3. Minimizes Damages At Par
Electronic securities minimized the risk of physical damage as well as the cloning of shares into fake ones.
4. Physical Record Handling Gets Settled
A demat account functions electronically & conveniently through a smartphone or computer & offers uninterrupted management of share transactions, which averts the need for the investor to be physically present to settle transactions, so it ensures confidentiality and authenticity.
5. All Company Shares can be reviewed in a Single Account
The shares that are created through the collaboration and consolidation of companies are credited automatically in the DEMAT account.
Certain banks also permit the holding of both equity and debt securities in a single account.
6. No Scope of loss of Share Certificate in Transit
The risks pertaining to physical certificates, like loss, theft, forgery, and damage, are waived with a DEMAT account.
7. Stamp Duty not Required for the Transfer of Securities in Demat Mode
There is no need for stamp duty for the transfer of securities, and this pulls down the cost of the transaction significantly.
8. Automatic Credit of Non-Cash Benefits in Demat Account
The
Read Also: Complete Procedure For Dematerialisation Of Shares Under RTA
9. Notifications Through SMS
Alerts are sent through SMS for all the debit and credit in your
10. Customer Care Help
Banks also provide dedicated and trained customer care officers to assist you through all the procedures.
11. No Predetermined Limit of Transactions
A demat account holder can buy or sell any amount of shares. While in the case of physical securities, there is a limit on the number of transactions done using the same.
12. Loan Availability
One can opt for the facility of a loan against securities like bonds & debentures present in a DEMAT account as collateral to the lender.
13. No Need to Communicate Individually
As all the transactions occur through the depository participant, it eradicates the need for the trader to communicate personally with each and every company.
14. No Third Party Involvement
Trading can be done easily & smoothly through computers at any location; this wipes off the need to visit a broker.
15. Provides Nomination Facility
Providing a nominee is one of the key features of holding a Demat account, which permits the investor to grant a right to the nominee to operate the account in his/her absence.
16. Reduces Transaction Costs
A demat account ensures that entitlements are directly credited to the investor’s account; this cuts down the transaction cost.
Benefits of Demat for Different Groups:
Benefits to Investors
- Trading using a Demat account is indeed a big time-saver. Individual investors can trade online without the need to perform extensive paperwork and visit brokers.
- Dematerialisation diminish the risk of disorganization such as prolonged settlements and deliveries, thus assuring faster and safer transactions
- Investors can keep watch over their shares irrespective of place and time; this boosts their interest and participation and hence increases their potential for profits.
- Demat shares can avail the facility of procurement of loans to investors at a lower interest rate by offering the higher level of liquidity and acceptability of securities in Demat.
Benefits to the Company
- Electronic delivery of shares by companies brings transparency and efficiency in the trading system by facilitating the abrupt and smart transfer of shares
- Online trading using a
demat account is paperless trading, which is advantageous from both an administrative and environmental perspective. Dematerialisation helps in cutting down costs involved in printing and issuing shares to investors.- Demat account helps the company to communicate with the shareholders easily & timely because of minimal dependencies.
Benefit to the Brokers
- Dematerialisation limits the risk of fraud, theft, and fake deliveries, which enables brokers to offer more satisfactory and efficient services.
- Any time any place online monitoring of shares by investors increases the interest and participation of investors in trading, and this elevates their earning potential and profits, which in turn benefits the brokers as well.
- The convenient and rapid transfer of Demat shares boosts the confidence of investors, thus increasing the level of trust they put in the brokerage service.
The introduction of DEMAT accounts has brought much convenience and benefit for all the individuals and has made the process of investing and trading in the stock market much more guarded and plain sailing for Indian investors.
