Dematerialization is the process of converting securities into an electronic form. It is known by the abbreviation “Demat.” Using physical copies of share certificates that required verification at each point of transaction was a hassle for traders. So, the Securities and Exchange Board of India (SEBI) introduced the Demat account in 1996. As managing securities was difficult, trading was slow and inconvenient.
These issues were resolved with the launch of the Demat account. All your securities, such as stocks, shares, bonds, etc., are kept in a Demat account in electronic format. Thus, Demat accounts brought revolution. You can explore some of the best Demat account in India and explore the benefits of it. Now that you know the Demat account’s meaning. Let’s discuss the benefits offered by Demat accounts.
1. Safety and Security
Demat accounts improved the safety of securities in the following ways.
Safe Storage: A Demat account offers a safe and secure way to keep securities. This avoids the possibility of physical certificates being lost, stolen, or damaged.
Protection from Physical Damage: Physical certificates of shares were frequently damaged or lost. This danger is now eliminated from the stock market with a Demat account. Many stock brokers offer free demat account openings for investors.
2. Convenience and Accessibility
It is now much easier to transact on the share market, thanks to Demat accounts.
Access to Account Statements: Account statements can be accessed online at any time and from any location. Demat account holders can view their transaction histories and other pertinent data.
Paperless transactions: Trading and investing in securities using a Demat account is done without the need for paper. As a result, it does away with the requirement for actual share certificates and speeds up and simplifies transactions.
Easy Management of Investments: A Demat Account can offer quick and straightforward management of your assets and statements through Internet banking. Additionally, any desktop, mobile, or other digital device can access this information.
3. Dematerialisation and Conversion
Investors can now convert their existing physical share certificates into digital format.
Instant conversion of Securities: All an investor needs to do to convert physical documents to digital form is inform the depository participant (DP) that they exist. Additionally, digital credentials can be instantly converted to physical forms if required. You can easily learn how to open Demat account from online stock brokers.
4. Dividends and Other Rewards
Investors can now easily track corporate actions and dividends.
Automatic crediting of dividends, interest, and rebates: Receiving dividends, interest, or rebates used to be a difficult process, but Demat Accounts have replaced it with quick and easy procedures. The account is automatically credited with everything.
Convenient updates on corporate actions: Using an electronic clearing service (ECS) to update investors’ accounts with, among other things, stock splits, bonus issues, rights, and public issues is also fairly convenient.
5. Efficient Purchase and Sale of Assets
Buying and selling assets has become a lot easier.
Convenient Purchase and Sale of Securities: Stock exchanges, whether for buying or selling, are now quicker. Previously, it would take about a month to physically swap stocks. The simpler strategy has resulted in lower costs. Asset transfers involving digitally stored assets are exempt from stamp duty.
Faster Receiving money while selling shares has become simpler, quicker, and more comfortable thanks to liquidity Demat accounts.
Lower costs: The cost of holding securities in a Demat account is lower than storing them in a traditional physical certificate. Account opening and maintenance fees are also relatively low.
Purchase of Odd Lots: With tangible certificates, just the quantities indicated made buying and selling possible. Additionally unavailable was the ease of working with odd lots or lone security. Demat accounts resolve this problem.
6. Easy Account Management
The introduction of Demat accounts also revolutionized how investors managed their investment accounts.
Swift and Smooth Transfer of Assets: Securities can be swiftly and easily transferred from one Demat account to another, which streamlines the purchasing and selling procedure.
Tracking corporate actions: A Demat account holder can simply keep track of company events including dividends, stock splits, and bonus shares. The securities are promptly credited to the account and the account is automatically updated.
Freezing Demat Account: An asset type or number in a Demat account can be frozen by the account’s owner. He or she may also choose to suspend the Demat Account for a predetermined period. By doing this, money won’t be able to be sent from any Debit or Credit Cards to the designated Demat Account.
No TDS: TDS was a significant problem with physical certificates of shares, but it does not apply to digital assets. For investors who make stock market investments, it is also cost-effective.
Nomination: Investors can now easily maintain a nominee for all of their investments via a Demat account. It was virtually hard to do so with a tangible Certificate of Share.
Investor Information: Investor name and bank account name used to be a big problem while making stock market investments. This uncertainty has been eliminated thanks to Demat accounts, which are linked directly to investors’ bank accounts.
Demat accounts store securities in electronic format. Investors can hold, track, and swap shares, bonds, and other securities in one location with the help of Demat accounts play a significant role in every investor’s journey. So, renowned firms like BlinkX offer excellent Demat and Demat apps that come with loads of features. The app is a one-stop solution for financial services, equity trading, commodity and currency trading, and mutual fund investments.