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What is a Demat Account?
by Sanjay Rane AthorI got
an email last week from someone asking about opening a demat account, and in
the SBI and IDFC thread you might have noticed that there are several people
who don’t have demat accounts, but will have to open one soon because nowadays
you need one even to invest in these bond issues.
Let’s
start with what a Demat account is, and then we can move on to the several
options currently available in India.
My
grandpa used to have a black briefcase where he stored all his physical share
certificates.
Eventually
he dematerialized all his shares and moved them to an electronic briefcase,
which is how he described his Demat account, and I think this is quite apt to
understand the concept.
A Demat
account is like a brief case where you store your shares and bonds electronically.
In
India there are two Depositories – NSDL and CSDL – and you can think of these
depositories as banks that hold your shares and bonds in electronic form.
A
regular investor can’t deal with a depository directly, and you have to deal
with their agents which are called Depository Participants (DPs).
There are hundreds of DPs in
India, and you can open a demat account with one that suits you in terms of
price and convenience. Normally, people open a Demat and a trading account with
the same institution as it makes transactions cheaper, and is more convenient
to get started as well.
So you could have a trading
account and a DP account with SBI or ICICI Direct, Reliance securities.It is in
fact better to have trading and DP account with the same organization because
in those cases you are waived off the DP transaction fees.
Effectively,
you are using an agent in the form of a depository participant to avail the
services of a depository which are storing your shares and bonds
electronically.
Source from : http://www.onemint.com/2010/12/03/what-is-a-demat-account-and-how-can-you-open-one/
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About Sanjay Rane 
Athor
0 connections, 0 recommendations, 7 honor points.Joined APSense since, February 21st, 2015, From mumbai, India.
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