Introduction
In the 1990s, India saw tremendous capital market growth, which brought more difficulties to paper-based transactions. This is when the Depositories Act of 1996 came into being. Under the act, two depository systems were established: NSDL and CDSL. With the help of these depository systems, the conversion of physical shares into electronic form took place. This process was known as dematerialisation and led to the formation of the online Demat account.
Here, we will dive deep into the benefits that the dematerialisation service offers investors.
Understanding a Demat Account
Think of the dematerialised or Demat account as a bank account for all your securities. It essentially acts as a digital repository for all your bonds, shares, mutual funds etc. With a Demat account, you can easily manage all your securities and access them from anywhere as long as you have an internet connection.
There is no minimum age requirement for opening a Demat account when you want to begin your trading journey. Demat accounts can also be held by minors, established and monitored by their parents or legal guardians, on their behalf. The bottom line is that you cannot start your trading journey without opening a Demat account.
What is Dematerialisation
Dematerialisation is the process of converting physical shares to electronic format. This enables investors to carry out transactions seamlessly through various online trading platforms including mobile applications and websites. For easy access, you can simply download the Trading App and get started on your investment journey.
Benefits for Investors
Dematerialisation comes with many benefits for investors in the share market. Listed below are a few of them.
1. Convenient and Easy
The main purpose of a Demat account is to help you carry out transactions electronically. An investor’s physical presence at their broker’s is not required to carry out trades anymore. Since the Demat account can also be accessed through mobiles or laptops, trades can easily be carried out while on the move, providing extreme flexibility to investors. The investor can have access to the Demat account using a computer or smartphone.
2. Transfer of Funds
Since Demat accounts need to be linked with your bank account, any and every transfer of funds can be carried out electronically without any hassles. The patience for drawing a cheque or filling out a fund transfer form to do so manually is long gone.
3. Safety and Security
The Demat account is, without a doubt, the safest way to carry out transactions digitally. Safety or security issues that existed with physical share certificates like theft, damage or loss, do not exist with a Demat account.
4. Nomination Facility
With a Demat account, investors can nominate people they trust to operate the account in their absence. This nominee can carry out a transaction on behalf of the investor when the latter cannot do so themselves.
5. Paperless Access
Since everything is done electronically or digitally, the whole process becomes paperless. This aspect, among other things, has become useful for companies to reduce their administrative costs. To add to this, less consumption of paper is also good for the environment.
6. Avail Loan Facility
With the help of the Demat account, investors can also avail loans against the securities that they have in their account. These securities can be used as collateral against which the loan can be taken.
7. Easily Traceable
A Demat account allows investors to monitor their investment portfolio from anywhere. When investors have the option to monitor their investments from anywhere, the chances of making more profits increase manifold.
8. Multiple Purposes
The Demat account, apart from being used to hold shares or equities, also holds debt instruments like mutual fund units. Investors can also invest in government bonds, exchange-traded funds, etc. through the Demat account.
Conclusion
The dematerialisation process has truly changed the way trading is done in the market, adding convenience, flexibility and security to the mix. Dematerialisation has provided many benefits to investors and continues to do so with every new feature that it adds to its repertoire.