Before 1996, the introduction of Demat accounts to India, traders had to keep physical copies of trades. These copies needed to be checked at each stage. Trading was tedious and also took place less often due to the responsibility of managing securities. It is now much easier. What is a Demat account? How can it benefit trading?
Demat stands for 'dematerialized'. This means that securities in a Demat account have been made available electronically. These electronic securities can be accessed easily and safely stored in a digital archive. Nearly everyone who has ever tried to trade in the stock exchange trading world has a Demat account. A Demat account is required in order to trade.
Non-resident Indians (or NRIs) are individuals who don't reside in India. They have the option of trading in India through a Demat account. Although there are many types of Demat accounts, their functions are almost identical. These are the different types of Demat accounts which have made trading easy and accessible.
Traders have access to three types of Demat accounts. Indian residents as well as non-resident Indians can trade via the demat accounts listed below. You should ensure that you choose the right Demat account for you based on your specific needs and location. You will have a greater market participation if you choose the right Demat account. These are:
It is the best Demat account for Indian traders. This account is the most popular Demat account, as it's ideal for those who trade only in equity shares. The shares bought and sold in a regular Demat account are electronically stored. If you intend to trade in options and futures, then you don't need a regular Demat account. Options and futures have a expiry date and should not be stored in a Demat account long-term.
The securities and exchange board of India recently introduced a new type of Demat account called the Basic Services Demat Account (BSDA). A Basic Services Demat Account works in the same way as a regular account. There are no maintenance fees for this type of account, if the account's assets are less than Rs50,000. A Rs100 maintenance fee is charged to investors who have between Rs50,000-Rs2,00,000. BSDA was created to promote financial inclusion. Investors who do not have the ability to trade in markets can choose from one of the demat accounts online.
Indian non-residents have the option of trading Indian securities. This can be done by using a repatriable bank account. This allows traders to send funds overseas. The only problem with a repatriable Demat account is the requirement for an external non-resident bank account to have these types of Demat accounts. You must close any Demat account you had as a resident Indian once you have become a nonresident India.
After your account has been closed, you can transfer shares into a Demat account called a nonresident ordinary demat (NRO). Let's say you want to sell your shares. A repatriation restriction is applicable in this instance. This repatriation restriction allows you to repatriate up to $1 million per calendar-year. It applies from January through December.
A second type of demat account is available that is best for non-resident Indians. This account is called a non-repatriable. This type of online demat account does not allow wealth and funds to be transferred between nationalities. A non-repatriable account is similar to a repatriable account. However, one must associate the funds with an ordinary non-resident bank account.
Online demat accounts are available for both Indian residents and non-residents. There are three types of demat accounts: regular, repatriable and non-repatriable.