Before you begin your adventure in the financial world, especially the stock market, you ought to start with the basics. As part of the initial steps towards stock trading, you need to open an account to store all your equities or shares. Such accounts are called Demat account or dematerialised accounts. Let us understand the Demat account meaning as well as the process of Dematerialisation.
What is Dematerialisation?
Dematerialisation means that you can protect your share certificates (physical shares) by converting them into electronic formats. It gives you the opportunity of protecting your certificates from the risk of being forged, stolen or duplicated.
What is the Dematerialisation of securities?
Dematerialisation of securities is a process of converting your physical certificates or proof of shareholding into the electronic format. These dematerialised certificates are then stored in the Demat accounts owned by you. Depositories like the NSDL (National securities depository Limited) and CSDL (central security depository limited) are responsible for the safe-keeping and overall security of your essential certificates.
What is a Demat Account?
These accounts provide the feature of security and shareholding in an electronic format on an online portal. They are made free in India, by the depositors like NSDL (National securities depository Limited) and CSDL (central security depository limited). While you can create a free account, you get to choose the specific subscription you want, or as per the value you wish to store in them.
• All the shares bought and sold in a Demat account, for instance, if you buy a stock, it gets transferred to your Demat account while the money for the same is deducted from your transactional account.
• Similarly, if you sell a share the certificate of the same if acquired from your Demat account, the amount received in the transaction gets transferred in your transactional account only.
• It is like a repository of all your shares and its corresponding data.
How are the Dematerialisation of security and Demat accounts linked?
Dematerialisation gets done through your Demat account. From your respective account, you put out a request for Dematerialisation, also called DRF. This then directs you to the window where you need to fill the form and also produce and attach a copy of your certificate on the specific window.
• The Depository Participant (DP) then acquires the necessary grants to convert your certificate into physical formats, and then post-approval provides you with the electronic certificate of your shareholdings.
• Before this, your physical certificate gets declared null and destroyed so that you only have one type of certificate present for all your future investments.
Final Word
Your investments are stored at a secure portal, and if need be, you can easily access them through your account. Considering the service is free of cost, there is no harm in opening an account that gives the feature of repository and security at the same time. Being administered by the government authorities, increases credibility, making it the best way to secure your money.
