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What Are Different Types Of Demat Account In India?

Of course, it is a crucial factor to know What Are Different Types Of Demat Account In India are before choosing your favorite.

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To understand What are different types of demat account in India? And how they differ, let’s see what a Demat account is first. 

A Demat (or dematerialized) account is really a virtual account that keeps shares in an electronic medium. You can buy stocks and keep them securely with a Demat account. It’s like having a bank account. Shares, bonds, ETFs, mutual funds, government securities, and other investments can all be held in a Demat account. 

An increase in the number of new Demat accounts indicates an increase in stock investors. To invest in some parts of the equity markets, you must have a Demat account.

When you buy shares, they are deposited to your Demat account, and then when you sell them, they are withdrawn from your profile. Any stocks you own in paper form could be dematerialized and kept in your Demat account in electronic form. 

What Are Different Types Of Demat Account In India? 

It’s essential to understand the uses of a Demat account to make the best use of them. 

In their tangible form, shares and stocks are constantly at risk of being misplaced, destroyed, and so on. A Demat account overcomes this safety risk because the securities are held in electronic format. In addition, to trade in the stock market, you must have a Demat account, which you cannot do without.

Better Access: Because Demat accounts are entirely online, they may be accessed from anywhere in the globe at any time.

Different Holdings: One Demat account may house a variety of investments such as equity funds, mutual shares, bonds, and exchange-traded stocks, and it can be established although you don’t own any shares.

Easier Monitoring: Demat accounts make it simple to keep track of one’s investments from the convenience of one’s own home.

Quick and Efficient: This internet platform makes trading incredibly convenient and time-consuming because everything is digital. In a couple of seconds, one can purchase, sell, or transfer cash and assets.

Regular Demat Account

Investors who live in India utilize a conventional Demat account. It is the ideal Demat account for those who exclusively trade stocks. When you purchase shares in a corporation, they are held in a Demat account in digital format. When it is time to sell the shares, they are taken immediately from the Demat account. 

You don’t need a conventional Demat account to trade in the derivatives area because they don’t have to be kept. The depositories control the Demat account, but depository operators, often known as stockbrokers, handle the opening and upkeep. 

The Securities and Exchange Board developed a new form of Demat account called the Basic Services Demat Account (BSDA) to encourage access to finance. The stockbrokers charge a Demat startup fee and a Demat maintenance fee. The essential services of a Demat account are comparable to a conventional bank account, except that the maintenance fees are somewhat higher. 

For first-time investors, the important services of a Demat account are designed to lessen the entrance barrier. The costs are Rs 100 per annum if the holding is between Rs 50,000 and Rs 2 lakh. If the holding is less than Rs 50,000, there are no maintenance expenses for the basic services Demat account.

Repatriable Demat Account

Non-resident Indians can participate in the equities markets with Indians who live in the country. On the other hand, NRIs cannot invest through a standard Demat account since monies cannot be repatriated from a standard Demat account. 

A repatriable Demat account allows you to move cash internationally, but you’ll require a Non-Resident External NRE bank account. You must shut your normal Demat account and move your holdings to a Non-resident ordinary Demat account if you become an NRI and have stock interests in India.

Non-repatriable Demat Account

Non-repatriable Demat accounts are similar to repatriable Demat accounts in that they are intended for non-resident Indians. It’s designed for NRI investors who wish to use their money in India. A repatriable Demat account may be used to move money overseas, whereas non-repatriable Demat accounts do not enable cash to be transferred.

Demat accounts in India are divided into three categories based on their features and functionality: regular, repatriable, and non-repatriable. The top Demat accounts may also be classified according to the services they provide. 

Demat accounts are classified as 2-in-1 accounts or 3-in-1 accounts based on ancillary services such as trading accounts and bank accounts.

  • A two-in-one account combines trading and Demat accounts. If you want to register a Demat account, the brokerage will also give you the opportunity to establish a trading account.
  • A three-in-one account combines a trading account, a depository account, and a bank account. Bank stockbroking operations often provide it.

Final Takeaways

Investing in the Indian stock markets now necessitates the use of a Demat account. Demat accounts come in various shapes and sizes, serving a distinct function. The process of creating a standard Demat account for a resident Indian is relatively straightforward. It is possible to do so through a broker of one’s choosing. 

The rules for NRIs, on the other hand, are different. They have been subjected to some limitations. NRIs must follow the Foreign Exchange Management Act’s provisions, which require them to open slightly altered versions of Demat accounts.

Frequently Asked Questions

Is it possible to link my Demat and trading accounts?

Yes, it is possible to link your trading and Demat accounts together. This will also save you from providing your Demat account information for each transaction. The shares will be deposited or debited from the associated Demat account after the order is executed.

What is the main advantage of being a part of a depository?

Instantaneous transfer of equities, no stamp duty on transfers of securities, removal of dangers related to physical credentials such as bad transfer, counterfeit securities, reduction in paperwork involved in securities transfers, reduction in transaction cost, and nominee facility are all advantages of joining a depository.

Is it possible for someone else to use my Demat account?

Yes. By completing a power of attorney and submitting it to your DP, you can authorize anybody to run your account on your behalf.

About Mohanraj

Mohanraj is SmartFinder's Top Editor.  Have written over 700+ posts for SmartFinder with a team of tech experts. Passionate about technology, Mohan is keen on bringing the latest tech news to millions of internet users in India. Find him on Twitter and Linkedin.

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