Demat Account – Overview
What is a demat account?
Demat stands for dematerialization. The shares you buy from the stock market dematerialize into electronic form in this account. Like a bank account where you can check the balance of your money, you can view your shares/holdings that you own. This is different from a trading account and is required to trade on the Equity markets.
Advantages of having a demat and trading account with RKSV
- This account generally helps us to avoid problems which are associated with physical share certificates, such as:
- Delivery failures caused by signature mismatch
- Eliminating the risks associated with forging of the shares certificates, and postal delay
- It is easy and convenient to hold securities in this account
- No stamp duty to be paid on transfer of shares.
- Safer than shares which are in paper form due to theft, forgery.
- Change in clients address recorded with a demat partner gets registered with all companies in which the share holder has securities thus no need to correspond with each of them separately.
- Automatic credit into demat account for shares which arises out of bonus and splits.
- The demat account also reduces the risks for the brokers for delayed settlements. It reduces risks of delayed settlement.
- Traders can deal in shares from anywhere using this account.
I have physical shares, how do I convert them to an electronic format?
In order to dematerialise physical securities, every client has to fill in a Demat Request Form which is commonly known as DRF. The same would be available with the demat participant and has to be submitted along with physical share certificates.
Every security has an ISIN (International Securities Identification Number). A separate DRF must be filled for each security. The complete process of dematerialisation involves just two simple steps mentioned below
- The investor surrenders the certificates for dematerialisation to the DP.
- DP updates the account of the investor.
Remember, you don’t need a DP account to trade other instruments such as F&O, currency or commodity. You only need to open a demat account if you want to trade in the Capital markets (buying/selling Equity).
RKSV has partnered with one of the biggest DP companies – IL&FS for opening Demat accounts. If you are an RKSV customer and wish to open a demat account, click here to know more.
In the next blog post, I will cover PoA (Power of Attorney) and how it relates to normal demat accounts.