Trading in the stock market and other securities markets is increasing day by day. It has been made possible with the help of a Demat account. A Demat account allows its holders to hold their holdings in electronic and paperless form. Earlier, when there were no Demat accounts, dealing in securities and stocks used to be done in paper forms. The owners of the stocks were given holding certificates. If you lose the certificate, you will have no long ownership of the stocks.
Due to this, it was possible to fraudulently transfer the securities. But it is not possible anymore. Because in Demat accounts, there is no need for any sort of certificate to claim the ownership of the stocks. As long as stocks appear in your account, you are the owner. Furthermore, earlier, it was a very time-consuming process. It was not as easy as clicking on buying and selling buttons. You had to deal in this market through brokers only and you also had to pay charges to them whether you make a profit or not. You had to apply for buying and selling of stocks and wait for at least 2 days because a lot of paperwork was involved in these transactions. But in current scenarios, there are no such issues. Because in Demat accounts, there is direct and instant dealing.
Working of Demat accounts:
A Demat account works like a bank account but in dealing through this account, 3 parties are involved. Those three parties are a bank, depository participant, and repository.
Bank: As you know, you need money to buy stocks. If you won’t have money then you won’t be able to buy any stock. But how will you get money in your Demat account? Do you need to go anywhere to get money deposited in your account? No, there are no such requirements, you are only required to link your Demat account with your savings bank account and you can easily add or withdraw from your account. The more money you add the more shares you will be able to buy. Furthermore, you can even hold money in your Demat wallet.
Depository participant: Second party that is involved in the working of a Demat account is a depository participant. A depository participant is a party that is allowed to manage the Demat accounts. These parties have been granted authorizations from NSDL and CSDL.
Depository: The third party that is involved in this process is a depository. A depository is responsible for the management of Demat accounts. If there is no depository then there will be no proper management of Demat accounts.
Apart from the parties involved in the working of a Demat account, you should also know about a Demat account. If you have opened this account then you can deal in securities without any difficulty. Before, you put your money in a stock, you are required to proper analysis of the stock through its movement charts and the details of the company. This account allows you for the same. You can open such an account on the 5paisa website.