Demat account
Demat account – Demat is short form of de-materialisation of shares. In short, demat is a process where at the customer’s request the physical stock is converted into electronic entries in the depository system.
In January 1998 SEBI (Securities and Exchange Board of India) initiated demat accountancy system to regulate and to improve stock investing.
As on date, to trade on shares it has become compulsory to have a share demat account and all trades take place through demat.
How to operate demat account:
One need to open a demat account with any of the branches of the bank. After opening an account with any bank, by filling the demat request from one can handover the securities. The rest will be taken care by the bank and the customer will receive credit of shares as soon as it is confirmed by the Company/Register and transfer agent. There is no physical movement of share certification anymore. Any buying or selling of shares is done via electronic transfers.
- If the investor wants to sell his shares, he has to place an order with his broker and give a “delivery instruction” to his DP (Depository Participant). The DP will debit his account with the number of shares sold by him.
- If one wants to buy shares, he has to inform his broker about his depository account number so that the shares bought by him or credited into his account.
- payment for the electronics shares bought or sold is to be made in the same way as in the case of physical securities.
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