Demat accounts are very simple to understand. It's an electronic way for one to store all of his investments (e.g. bonds, shares and mutual fund) in one place. This also allows one to track them easily and safely.
Since its inception, the Demat account opening promotion has been aggressively driven by many factors. It is explained below:
The electronic process makes it easier to transact shares, which reduces paperwork and is therefore more cost-effective. Now that we have understood the purpose and meaning of Demat accounts let's take a look into some concepts and processes associated to such accounts.
Individuals can transfer their Demat holdings to another institution free of charge. The Beneficiary Owners' accounts (BO) at the transferor Depository Participant DP and the transferee account DP will be identical if they choose this option. They will need to open a new Demat account in the same name if they want to transfer a joint Demat account.
A depository is an area where all electronic securities are kept centrally. India has two such depository services: the Central Depository Services Limited, (CDSL), and the National Securities Depository Limited. Individuals can access these services through any of the DPs, as per the Depositories Act.
This is where physical certificates can be converted into electronic securities. Investors are required to follow the example of all transactions that are executed electronically.
The DP will review the details and submit the certificate with the Demat Request Form. In approximately 30 days, the dematerialization process is complete.
The request is processed by the Registrar or Company upon receipt of the DRF, physical securities, and the DRF. After the request is approved, electronic securities are credited to holders' Demat accounts. Investors who are denied a request for electronic securities must contact the DP to obtain assistance in submitting a new DRF.
If the investment is held jointly by a deceased investor, the surviving holder/s must submit certificates, the death certificate and the Transmission cum Demat form (to the DP). All surviving holders must match the Demat account.
To convert the Demat account into an electronic format, a Transposition cum Demat Form must be submitted to the DP if the Demat account names do not match those on the physical certificates.
Remat Request Form (RF) is used to convert electronic holdings into physical certificates. All holders must sign the RRF, which will be verified by the DP. It is then sent to the Company/Registrar.
By submitting a request at the DP, demat account holders can be granted permission to freeze their accounts. Holders must submit a request to the DP in the format required by the DP in order to defreeze their accounts.
All holders must sign a request form. Before closing the Demat account, all holdings must be transferred. Close the Demat account if there are pending corporate actions or dematerialisation requests.
Users can begin financial planning by equity investing once they have a good understanding of the different concepts and how Demat accounts work.