Why Do You Need a Demat Account in India?

Why Do You Need a Demat Account in India?

The Demat Account is a digitally functioning account that safely holds dematerialised securities, such as stocks, mutual funds, bonds, exchange-traded ETFs, etc. Two basic accounts are necessary in order to effectively trade on the stock market, namely a Demat Account for holding shares electronically and a Trading Account that allows you to perform buying and selling orders quickly.

You may be wondering why you need a Demat Account in India. The reason is that it serves as a valuable solution that reduces the complexity of physical transactions. It is a simple and painless process to open an online Demat account. The Demat account holds major importance, and it is a major need of Demat accounts in the stock market. To learn why you need a Demat account, check this detailed guide below for understanding.

What is a Demat Account?

Investors use the Demat accounts to store shares and securities electronically. The National Securities Depository Limited launched a new era of electronic stock and security storage with the introduction of Demat accounts in 1996.

A Demat account, also known as a Dematerialised account, is an electronic digital repository where you can store and manage your securities, mainly stocks and bonds. It's a way of bridging the gap between your investments and the stock market, making trading and investment processes more convenient and secure.

A Demat account is the digital storage of your stock investments. This account stores your shares electronically instead of dealing with physical paper certificates. Demat accounts are designed to safeguard your share and reduce the risk of loss or forgery.

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Table of Content

  1. What is a Demat Account?
  2. Reasons Why You Need a Demat account
  3. What are the Benefits of a Demat Account?
  4. Why is it Important to Open a Demat Account?
  5. How to Open a Demat Account

Reasons Why You Need a Demat account

The reason why you need a Demat account is as follows.

  1. Hold securities and shares electronically, eliminating the lengthy paperwork needed to keep them in physical form. 
  2. Get rid of the risk that fake shares could be obtained. 
  3. Make the investment process as easy and simple as possible. 
  4. Make investors more easily and quickly available. 
  5. You can buy or sell shares in the Demat account and store them safely. 
  6. Hold a wide variety of investments like equity, exchange-traded funds, mutual funds, bonds, etc. Transfer of shareholdings between investors.
  7. By requesting the depository participants, you can convert securities into computerised and tangible forms in accordance with your need for a Demat account. 
  8. From anywhere in the world, you can access your holdings in a deposit account. 
  9. Automatic access to dividends, interest, and refunds. 
  10. Use the freezing feature to protect your account for a predetermined amount of time. 
  11. To speed up and simplify the process, send instruction slips electronically to DPs rather than in person.

For the above reason, you need a Demat account, which is easy to open online.

What are the Benefits of a Demat Account?

The benefits of a Demat account are as follows.

1. Time Saving

Buying and selling shares can be done quickly and easily through a Demat account while increasing liquidity in the market. Furthermore, considerable progress has been made on the transfer of shares. 

2. Easy Tracking

Demat accounts not only reduce efforts to monitor physical documents, but they also eliminate the need for manual record-keeping because all your documents and investments are stored on a secure server.

3. The risk of document loss has decreased

When the Demat account was first introduced, shares were typically in the form of paper certificates that could be hacked, stolen, lost, or forged. Furthermore, it took an excessive amount of paperwork to transfer the shares. This often resulted in errors and delays. You can safely store all your shares electronically in the Demat digital repository with a Demat account.

4. Cost-Effective

There are additional costs in physical transactions, such as handling fees and customs duties, which can be unpredictable. These additional costs are eliminated by the Demat accounts, leaving you with only brokerage charges that are transparent and upfront. Converting to a discount broker can boost savings even more, enabling today's traders to opt for the Demat account as an affordable option.

5. Ease of Access 

At any time, use your smartphone or laptop to access your Demat account easily.

These are the benefits of Demat accounts. It can increase the need for a Demat account for investors around the nation to trade in the share market. 

Why is it Important to Open a Demat Account?

The objective of the Demat account is to make it as effective as possible that securities are transferred from one Demat account to another. As a result of the rapid digitisation of the securities market, prices fluctuate every second. With millions of transactions taking place continuously, the need for a Demat account is rapidly growing among investors. The objective of the Demat account is to minimise the time needed for completing a securities transfer. 

Ensuring the protection of the securities it holds is another objective of Demat's account. Due to its digital nature, there is no risk of loss of shares or bonds, damage to the certificates, or forgery. You will be entered as the sole owner of the securities you purchased once this transfer has been completed. It highlights the needs and importance of a Demat account and why you need a Demat account when it comes to avoiding any discrepancies with regard to securities.

Have you ever wondered what is the pressing need to have a Demat account? What are the benefits you derive by opening a Demat account online? Today, it is possible to open a free demat account, especially with firms like BlinkX. However, the million-dollar question is whether this can really add value to you. In fact, Demat account benefits are numerous, and it is your gateway to the investment world.

Your trading account is pointless for investment unless you don’t have a Demat account to hold shares in electronic form. Demat accounts are linked to your trading account to facilitate seamless online trading. Let us look at in detail why you need a Demat account and how a Demat account can actually add value to an investor.

How to Open a Demat Account

The following steps will be taken.

Step 1: Open a broker portal & enter your email & mobile number

You can go to a stock broker website or app after clicking on the Open Demat account and entering details such as your phone number and email address. 

Step 2: Submit essential documents

Share your Aadhaar Card and PAN card details. Please enter your valid PAN number and bank information that you want to use for this transaction.

Step 3: Next, you need to go through E-KYC

You can verify your Know Your Customer details online.

Step 4: After Doing e-Kyc, sign the agreement

You need to sign the agreement with your stock broker.

Step 5: After doing the above, you will get a confirmation email from the broker

On your registered email, you will get a confirmation about your Demat account & its details, such as your Demat account number & password.



Thus, in order to hold shares or assets and begin trading in the stock market, you must have a Demat Account. To stay ahead in the stock trading game, all you have to do is register an online Demat account with a reliable partner who can facilitate the account opening process and offer state-of-the-art data and analysis. To make purchasing and selling shares easier, it is best to have a Demat account.

FAQs on Why you need a demat account?

A depository participant (DP) must register a Demat account for an investor who wishes to convert tangible shares into electronic format.

It's easy to use a Demat account. Your Demat account will be linked to your online trading account, and in turn, it'll connect to your bank account.

Before opening a demat account online, it is important to consider several factors. Your chosen demat account should have a solid reputation for providing secure transitions, high client satisfaction, and high service quality.