What do DEMAT accounts do?

 A DEMAT (short for "Dematerialized") account is an account that holds securities in an electronic format, rather than in physical form. It is used to buy, sell, and hold securities such as stocks, mutual funds, bonds, and other financial instruments.

In India, DEMAT accounts are maintained by a depository, which is an organization that holds securities in electronic form on behalf of the account holder. The two main depositories in India are the National Securities Depository Limited (NSDL) and the Central Depository Services Limited (CDSL).

To open a DEMAT account, an individual needs to approach a depository participant, who is typically a bank, a brokerage firm, or a financial institution that is registered with a depository. The account holder must provide personal and financial information, as well as proof of identity and address, to open the account.

Once the account is opened, the account holder can buy and sell securities through the account by placing orders with the depository participant. The securities are transferred electronically between the DEMAT accounts of the buyer and the seller. This eliminates the need for physical certificates, which can be lost, stolen, or damaged.

DEMAT accounts provide several benefits, including:

Ease of holding and trading securities: DEMAT accounts allow you to hold and trade securities electronically, which makes the process faster and more efficient. You can view your holdings, place orders, and track your transactions online or through a mobile app.

Improved security: DEMAT accounts reduce the risk of fraud and forgery, as the securities are held electronically and cannot be physically altered.

Reduced costs: DEMAT accounts eliminate the need for printing, stamping, and handling physical certificates, which can save you money on transaction costs.

Easy transfer of securities: DEMAT accounts make it easy to transfer securities between accounts, as there is no need for physical transfer of certificates. This can be especially useful in the case of inheritance or gifting of securities.