1. Introduction : Demat account of Dematnalized account provides the facility of holding sharesand securities in electronic format. During online trading, shares are bought and held in demat account. ‘Demat Accounts’ are now a days mandotary for most ecnrities and is also very convinient and safe mode of holding in Electronic mode.
2. Advantages of Demat Account:
(1) Share transaction (sell/purchase) process becomes easy, correct and speedy.
(2) On demat share, transaction commission charges are less, so trading expense is low on shares.
(3) Demat account share can be hypothecated to bank as security to obtain loan.
(4) Shares are transferred immediately in demat account after purchasing of share. The financial liquidity remains with investor.
(5) The ownership is transferred immediately after purchasing the share. There is no confusion or tension for it.
(6) The bonus share is immediately deposited in demat account after issurance of such share by the company.
(7) The bank provides online facility to demat accountholder. So, investor may check and know latest position of their share, stock and other particulars of account.
(8) It can be also used for mutual funds.
(9) It prevents transfer of share by forged signature, Stealing of share, lost of share, shares destroyed by fire, or torn of share.
(1O)Share transfer is online so, it is helpful to NRI. They can invest their savings in share/stock of Indian companies easily.
3. Limitations of Demat Account:
(1) The investor faces loss due to speculation activities in certain scripts in share market.
(2) If the volume of investment of investor is less in share market, it is a costly affair for him because he has to pay fees for opening account, annual maintainance fees, custodian fees, share transfer fees.
4. Conclusion : A demat account is the most fundamental to start investing in the stock market. It eliminates the risks associated with forgery and damaged stock certificates. Demat account holders also avoid stamp duty. So, trading expense is low on shares.