If you are planning to invest in the stock market, then it is necessary for you to open a demat account. Why is it necessary to open a demat account even if you have a savings account? Apart from this and what is its usefulness. We will try to understand all those things in simple language in this post.
What is Demat Account – What is Demat Account
Suppose you have a savings account and you deposit your money in it. Whereas you cannot deposit money in demat account. Whatever shares or bonds you buy, it is deposited in demat. Due to the deposit of shares in the demat account, investors can buy and sell them faster. It is worth noting that about 30 years ago there was no demat facility, at that time the shares were delivered in paper form at the doorstep of the investors . After the arrival of demat, it takes 1 day for the shares to be transferred to demat. In this way Demat Account keeps account of your shares, bonds and mutual funds .
Role of Demat in buying and selling of shares – Role of Demat in Share Trading Demat account plays a very important role in buying and selling of shares. After the purchase of a share, the account of the share is removed from one demat account and added to the other demat account. However, the functioning of a demat account is a bit difficult as compared to a bank account. Everyone has trouble understanding this process.
All the shares are deposited with the
depository The shares of all the companies are deposited with the depository. The depository registers the deposited shares of the company in demat in the name of its buyers. In the event of a transaction, the depository makes changes in the records of the demat account doing the transaction. That number of shares are removed from the demat account of the seller of the shares. At the same time, it is added to the demat account of the customers who buy. At present two depositories CDSL, NSDL are functioning in India. The Government of India has a stake in both the depositories.