Importance of Demat Account

Demat Account is important because of the following reasons:

1. Convenience: With Demat Account, investors find it convenient to hold and manage securities electronically. They can easily access their holdings, track transactions, and manage their portfolios from anywhere on their devices with just an internet connection.

2. Efficient Trading: Demat Account makes buying and selling of securities efficient and quicker. Investors can trade electronically which reduces the time of transaction and minimise paperwork.

3. Eliminates Physical Certificates: With Demat Account, there is no need for the investors to hold physical share certificates, eliminating the risk of their loss, cost of storage, and damage.

4. Safety and Security: A Demat Account offers the investors, a high-level security and safety for their holdings. When the investors hold their securities in dematerialised form, they are protected against risks like forgery, theft, and physical damage. Besides, there are several strict regulatory rules and safeguards that make sure the integrity of demat account transaction is maintained.

5.Portfolio Diversification: With Demat Account, investors can diversify their investment portfolio by holding different types of securities such as bonds, stocks, ETFs, and mutual funds, in one account.

6. Loan against Securities: Investors can even avail loans against the securities they have held in their accounts. Hence, it becomes convenient for them to easily liquidate their securities without selling them.

7. Access to IPOs and Coporate Actions: The Demat Account holders can participate in IPOs (Initial Public Offerings) and several corporate actions like bonus, dividend, and right issue.

Dematerialisation

A process where the securities held by an investor in physical form are cancelled and an electronic number or entry is given to the investor so that he/she can hold the securities as an electronic balance in their account is known as Dematerialisation. Simply put, Dematerialisation means the holding of securities in electronic form. For Dematerialisation, the investor has to open a Demat Account. In present times, all IPOs (Initial Public Offers) are issued in dematerialised form and more than 90% of a company’s turnover is settled by delivery in Demat Account. As per SEBI, it is compulsory for traders to trade in Demat form for some selected securities only. 

Benefits of Dematerialisation

1. Holding shares in Demat form is just like a bank account, which makes it a convenient process of holding shares. 
2. It reduces paperwork as the shares are held by the investors in electronic form.
3. Under Dematerialisation, a trader can convert the physical shares into electronic form, and shares in electronic form can be converted back into physical form.
4. One can even pledge or mortgage the Demat securities to get loans.
5. As the share certificate is in electronic form, there is no danger of theft, loss, or forgery.
6. It is the responsibility of a broker to credit the correct number of shares in the investor’s account.
7. One can hold securities of different companies in one Demat Account.