A Demat account or a Dematerialized account is a digital depository of your assets. Instead of physical certificates to keep account of your share market trading, a Demat account holds these certificates in a digital format in a depository mandated by the Securities and Exchange Board of India (SEBI).
There are four main types of Demat accounts. Before you open Demat account, read the following types to know more.
- Regular Demat Account:
The Regular Demat Account is for traders who reside in India. This Demat account enables Indian traders to trade in stock, shares, bonds, securities, etc., easily and in a convenient manner. These Demat accounts are offered by the National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL). Usually, an annual maintenance charge (AMC) is involved. You can even open a zero brokerage Demat account through the services available online.
- Basic Service Demat Account:
A Basic Service Demat Account is similar to a regular Demat account but a simpler version of the same. It is also for Indian traders, but especially for traders who don’t trade that frequently. A basic service Demat account or BSDA also has a lower or negligible maintenance charge, depending on your account holdings. If you are a small trader, you can consider opening this type of zero brokerage account.
- Repatriable Demat Account:
A Repatriable Demat Account is for non-resident Indians (NRI) to trade in India and transfer funds to their country of residence. For this purpose, it is important that the NRIs have a non-resident external (NRE) account. For Indians residing outside of India, this Demat account is a popular choice for wealth management. However, the NRIs can only transfer up to $1 million to their foreign account in one year.
- Non-Repatriable Demat Account:
The Non-Repatriable Demat Account is similar to the above because it is also an account for the non-resident Indians. However, there are restrictions on the transferring of funds abroad. It is important to have a non-resident ordinary (NRO) savings account in India. This Demat account is for NRIs to manage the income they earn in India which includes the dividends and shares.
Whether you want to trade in mutual funds, stocks, shares, securities or save any of your financial assets digitally, it is essential to have a Demat account in place. A Demat account comes with a lot of benefits, including keeping your assets safe and secured. The national depositories make sure that your Demat account is electronically secured and only you have access to it.
A Demat account also makes the trading process easy by conveniently allowing the buying and selling of shares. For some trading instruments, it has become necessary to have a Demat and a trading account. Apart from these benefits, it also saves space as you no longer have to physically keep your share certificates. They cannot be lost, stolen, or damaged, unlike the traditional certificates. So, whether you want to open a regular, basic service, repatriable, or non-repatriable Demat account, do your research and choose the best option.