Introduction
The word DEMAT account in India's financial language refers to any deposit made at an Indian monetary institution which could be used for making investment in stocks of shares and other commercial assets. Securities are seized automatically in a DEMAT account, thereby eradicating the need for any physical paper certificates. A DEMAT account came into existence after India started adopting the DEMAT system for the any electronic storage of stock shares and any other securities in the year 1996.The DEMAT is a short form for the term 'Dematerialized' and any DEMAT account requires that a depositor should open an account with a shareholder broker connected to an investment or any other funded account. Access to a DEMAT account entails both an Internet connection and a transaction password, and any such account permits the transfer of securities among the investments without any need for physical certificates being interchanged through hands. This feature helps in preventing problems associated with financial marketing such as loss, forgery or any form of theft of certificates. This also makes the procedure of buying and selling various securities much more easy and efficient.
Services
DEMAT account usage comes with a long list of benefits. Using a DEMAT account is very easy and a highly convenient manner to own securities. It makes immediate transferal of securities between two parties. It does not require any stamp duty on the transfer of securities. It is highly safer than paper share which was the earlier form and it included various risks related to physical certificates such as a bad delivery, fake securities, delays, thefts and lot more are mostly eliminated. Hence it reduced hectic paperwork for transfer of securities and in turn reduced transaction cost.
There is no problem of "odd lot" as even one stock share can be sold. Any change made in address documented with an account gets registered with all the companies in which the particular investor holds securities thus eliminating the requirement to correspond with all of them individually. All the transmission of the securities is mainly done by DP thus eliminating the requirement for notifying the companies. Automatic crediting into DEMAT account for various shares rising out of bonus/ split, consolidation/merger ,.,etc is done. A single DEMAT account can be used to hold investments in both equity as well as debt instruments. Traders of various stock can work from anywhere in the world. This depository system manages to help reducing the cost of various new issues that arise due to lower printing and distribution costs. It raises the efficiency of the administrators and the transfer agents and the accounting department of a corporation. It offers improved facilities for communication and appropriate service to shareholders and also to investors. The depository system actually reduces risks that are involved in holding physical certificates. It guarantees transfer settlements and reduces delay in registration of shares. It ensures faster communication to depositors. It also helps to avoid bad delivery problems that arise due to signature differences.
History
It ensures quicker payment on sales of shares. It offers more tolerability and fluidity of securities. It cuts risks of delayed settlement. It also ensures greater profit that arises due to growth in size of trading. It removes the chance of any form of forgery or bad delivery. It upsurges global trading and profitability issues. It increases the self-reliance in their investors.As there are two sides to a coin, likewise using DEMAT account also has a few disadvantages. Trading in securities may perhaps become uncontrolled in case of dematerialized securities. It is obligatory upon the capital market controller to have a close watch on the interchange in dematerialized securities and to see to it that the trading does not really act as a detriment to its investors. For dematerialized securities, the unavoidable role of key market players such as its stock brokers requests to be managed as they have the ability of manipulating the share market. Multiple supervisory frameworks have to be adapted to, including the Depositories Act, Regulations and the various bye laws of various other depositories.
Any Agreement is entered at several levels in the course of dematerialization. These might trigger worries to the investor who is wanting of simplicity. There is no facility to close a DEMAT account once created as it owns illiquid shares. The depositor cannot close the DEMAT account and he along with his descendants have to go on paying the money to the participant, like yearly folio charges, etc. After discharging the holdings of an account, numerous Indian investors fail to close their dp account. They are ignorant of the fact that DPs would charge even on DEMAT accounts that has nil holdings.