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Money matters

Advantages of Dematerialization

In the past few decades, the Indian capital market has undergone a phenomenal growth in terms of listed companies, number of stock exchanges, trade volumes of scrips, and investor population. This astounding growth of the capital market in India has been primarily due the introduction of the DEMAT account. DEMAT account is a type of account that holds shares and securities in electronic form. The process of converting physical shares into electronic form is termed as Dematerialization.

Online DEMAT account has become a necessity for an investor, if he wishes to trade stocks online. DEMAT accounts eliminates many problems that investors have to face while dealing with securities. They minimise paperwork that is involved with the ownership, trading, and transfer of securities. A DEMAT account is similar to a bank account, the only difference lies in the underlying asset held (DEMAT accounts hold shares while bank account hold money). It facilitates faster transactions and makes trade of securities extremely convenient. There are a wide range of advantages associated with a DEMAT account such as:-

  • The risks pertaining to physical certificates like loss, theft, forgery and damage are eliminated completely with a DEMAT account.

  • The lack of paperwork enables quicker transactions and higher efficiency in trading.

  • Trading has become more convenient as one can trade through computers at any location, without the need of visiting a broker.

  • The shares that are created through mergers and consolidation of companies are credited automatically in the DEMAT account.

  • As all the transactions occur through the depository participant, a trader does not need to communicate individually with each and every company.

  • There is no need for stamp duty for transfer of securities; this brings down the cost of transaction significantly.

  • Certain banks also permit holding of both equity and debt securities in a single account.

  • Banks also provide dedicated and trained customer care officers to assist you through all the procedures.

  • A DEMAT account holder can buy or sell any amount of shares. However, there is limit on the number of transactions done using physical securities.

  • One can also choose to take a loan against securities which are held in a DEMAT account by offering it as a collateral to the lender.

The introduction of DEMAT accounts have made investing in the stock market much more convenient and safe for Indian investors.

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