Demat accounts

Demat accounts or dematerialisation account are considered as the most accurate form of record keeping, helping investors to hold shares and securities in an electronic format for easier accessibility. It is the move from physical to electronic bookkeeping. It takes just around 15 minutes to have a demat account of your own at your disposal.

Demat account is provided by Depository Participant registered with the Depository. It can hold investments like shares, bonds, securities, mutual funds, ETF, and insurance.

To understand Demat Account meaning, let’s use an example. Let’s say you want to purchase the shares of Company X. When you buy those shares, they will have to be transferred in your name. In earlier times, you got physical shares certificates from the exchange with your name on it. This, as you can imagine, involved tonnes of paperwork. Each time a share was bought and sold, a certificate had to be created. To do away with this paperwork, India introduced the Demat Account system in 1996 for trades on NSE.

Today, there’s no paperwork involved, and physical certificates are no longer issued. So when you buy shares of Company X, all you get is an entry in electronic form, in your Demat Account. So this is what is a Demat Account.

Today if you want to trade/invest in the stock market (NSE & BSE) or other securities, having a Demat Account is a must. Your Demat Account number is compulsory for electronic settlements of the trades and transactions you do.

Just like a bank account holds money, a Demat Account holds your investments in an electronic form, which is easily accessible with a laptop or a smart device and Internet. All you need to have is the unique login ID and password to access it. However, unlike a bank account, your Demat Account need not have a ‘minimum balance’ of any sort.

In India, the number of demat accounts crossed 25 million in the last financial year (FY2023). This means that every month more than 2 million new demat accounts are registered in the depositories. The number of demat accounts registered with the country's main depositories, Central Depository Service (CDSL) and National Securities Depository (NSDL), increased by 27 percent from 89.7 million to 114.46 million.