Aims and Objectives of Demat account

The aims and objectives of demat account are to give investors a safe, effective, and practical platform for holding, trading, and managing their securities electronically and to increase transparency, liquidity, and accessibility in the stock markets.

The capital markets in India have seen significant development during the past 20 years. The extent and breadth of the operations have increased to previously unheard-of proportions throughout time. The rise has coincided with several technological advancements made by stock exchanges. 

In 1996, Indian stock exchanges shifted their trading of securities from physical to electronic. Following this change, the Demat account was introduced as a result of the dematerialisation of shares. Let's examine why the change was important and why investors need a Demat account in order to be successful.

What are the Aims and Objectives of the Demat account? 

For your reference, the following are the aims and objectives of opening a Demat account: 

1. Safety of Securities

Among the aims and objectives of Demat account, safety is the front-runner. When shares were available in tangible form, there was a considerable likelihood of losing or misplacing certificates. Your shares are securely and digitally held in a Demat account, so you won't have to worry about losing them.

2. Convenience

With Demat accounts, trading in the capital markets has gotten simpler. Cash is not required to be brought to the stock market. It also takes the human effort out of the equation for optimal ease. One of a Demat account's primary goals and objectives is to provide convenience.

3. Cost-effectiveness 

You had to fill out a tonne of paperwork and spend a tonne of time when shares were exchanged in tangible form. The cost of trading has decreased, and the system is now highly efficient.

Demat accounts have the additional cost-benefit of making stamp duty irrelevant. When trading actual shares, a share transfer stamp had to be purchased and adhered to the certificate's bottom. Investors occasionally needed to visit the stock market to obtain the share transfer stamp. 

For investors from small towns, obtaining share transfer stamps was more complicated and expensive. The removal of stamp duty has assisted in fulfilling the goal of demat accounts, which was to lower trading costs and make trading more accessible for investors.

4. Flexibility 

A lot of terms and conditions used to be associated with investing. It was challenging to hand-process every settlement. It is now simple to purchase and sell any quantity of shares without any limitations.

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Advantages of a Demat Account

1. You can access a range of funding choices with the aid of demat accounts. The bank is required to guarantee the security of the collateral when you apply for a loan.
2. Benefits receipt has become easier thanks to demat accounts. Any dividends, interest, or refunds announced by a corporation are automatically reflected in the Demat account.
3. Having good internet and being able to access the capital markets from wherever is now possible thanks to demat accounts.
4. You are not subject to restrictions like having to acquire or sell shares in set increments. As a result, one can also do transactions for a single share.
5. A Demat account may be accessed instantly from a variety of devices, including your PC or smartphone.

Why Demat Account is Required for Trading? 

For trading shares in India, a Demat account is necessary. But just the front-end is supported by the back-end repository. On the front end of a capital market transaction, securities must be transferred from the buyer to the seller. On the back end, securities must be transferred from the holder to the depository, often facilitated through a demat app.

To safeguard the security of the transaction, the depositories establish Demat accounts for each customer with individual numbers called ISIN.

Conclusion

The aims and objectives of a demat account revolve around modernising and streamlining the process of holding and trading securities. Demat accounts make investing easier for many people by allowing simultaneous access through several different channels. You may trade easily using your smartphone, tablet, or computer if you have a Demat account.

Demat accounts are essential, yet they are but a small portion of a much larger system. Additionally, you have to have a trading account and a bank account. Choose a trustworthy brokerage company for your Demat-cum-trading account after doing extensive research.