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Business News/ Money / Personal Finance/  Demat account features: From holding to pledging of shares, here's everything it offers
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Demat account features: From holding to pledging of shares, here's everything it offers

Demat account features: Having a demat account grants you access to various benefits. Firstly, you can participate in Initial Public offerings (IPOs) and receive dividends, bonus shares, and other corporate actions directly into your account.

Demat account features: With just one demat account, investors can buy shares, invest in mutual funds, and even in debt securities. (iStock)Premium
Demat account features: With just one demat account, investors can buy shares, invest in mutual funds, and even in debt securities. (iStock)

Demat account features: Demat accounts offer several features, making trading and investing in the stock market more convenient and secure for investors. Some of the features are electronic holding, online access, convenient transfer and pledging.

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India's capital market, boasting a century-long legacy, grappled with inefficiencies stemming from paper-based trade settlement, resulting in issues such as bad delivery and delayed title transfers. The enactment of the Depositories Act of 1996 has revolutionised the Indian stock market, facilitating seamless digital transactions of securities without a necessitating physical presence on trading floors.

As investors began trading online, brokerage firms and depository participants improved their demat and trading accounts. They regularly introduce new features to make trading easier and save users' time.

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In this article, we'll explore the benefits provided by a demat account beyond the basic buying and selling of shares. Additionally, we'll delve into the latest features available in demat accounts.

Beyond trading

In India, demat account services are primarily provided by two depository bodies known as NSDL and CDSL. These services are further facilitated by numerous “depository participants," such as banks, which act as intermediaries.

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Having a demat account grants you access to various benefits. Firstly, you can participate in Initial Public offerings (IPOs) and receive dividends, bonus shares, and other corporate actions directly into your account. 

Also Read: Demat Account: What are the tax implications of transactions?

This simplifies the process and ensures that you receive all entitlements seamlessly. Additionally, the transfer process is streamlined with demat accounts, as any number of securities can be transferred or delivered with just one instruction. This eliminates the need for paperwork and signing multiple transfer forms, making transactions more efficient and convenient.

Furthermore, demat accounts offer several other useful features. For instance, investors can nominate beneficiaries for their accounts, ensuring a smooth transmission of assets in case of unforeseen events. 

Moreover, demat accounts provide tools for portfolio management, allowing investors to easily track and manage their investment portfolios. They can monitor their holdings, view transaction history, and stay updated on corporate actions, all in one place. Lastly, demat accounts offer electronic storage for securities, providing a secure and convenient alternative to physical share certificates.

Also Read: Demat Account: Demat Accounts: What are NSDL and CDSL and what is the difference between the two? MintGenie explains

Global accessibility

Investors have the option to access their demat accounts from any location worldwide, as long as they're connected to the internet. Typically, demat accounts are managed through an online platform offered by the investor's brokerage firm or depository participant.

These platforms usually provide web-based interfaces and mobile apps, enabling investors to conveniently access and manage their accounts and holdings from any device with internet connectivity. Additionally, stringent security measures are implemented by brokerage firms and depository participants to protect investors' assets and personal data.

Also Read: Worried about the safety of your demat account? Here are 10 key practices to follow to keep it safe

Consolidating securities in one account

With just one demat account, investors can buy shares, invest in mutual funds, and even in debt securities. This strategic approach offers investors a holistic view of their investment portfolio, paving the way for more efficient and effective management.

Traditionally, investors maintained separate accounts for each asset class, necessitating one account for stocks and bonds within a demat account and another for mutual funds. However, the advent of demat accounts has revolutionised this conventional approach.

Pledging facility

Investors can pledge their securities held in demat mode. Moreover, the procedure for pledging securities in demat form is very convenient, both for the pledgor and the pledgee.

FAQs

What is dematerialisation (demat)?

Dematerialisation is the process of converting the physical certificates of an investor into an equivalent number of securities in electronic form.

Can investors participate in an IPO without a demat account?

Yes, investors can apply for an IPO through offline methods by obtaining an IPO offline application form from a broker. However, if investors are allocated shares, they will be directly credited to their demat account. Therefore, while applying for an IPO without a demat account is feasible, having one is mandatory to hold the shares if allotted.

Can all types of securities be pledged?

Yes, technically, all types of securities can be pledged. However, it depends on the pledgee's discretion whether they accept security for the pledge or not.

What is a ‘Basic Services Demat Account' (BSDA)?

BSDA is a special category of demat account that can be opened and held exclusively by individual investors.

Is nomination compulsory for a demat account?

SEBI has mandated that nomination should be recorded for demat account held by individuals. If a nomination is not to be given, then the account holder(s) should give a written and signed declaration to the effect.

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Published: 27 Mar 2024, 07:42 PM IST
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