You might have heard about the share market and stock exchange. It is considered a kind of a platform on which the shares of various companies are bought and sold. But have you ever wondered what a share exactly looks like? Is it a kind of a tangible asset or a certificate that can be touched? At least two decades back, this question had an affirmative answer when the shares could only be issued in a physical form. Let’s move on and know more about what is a demat account.
Dematerialization of shares
But after the introduction of the dematerialisation of security, all the shares belong in the intangible category, which can neither be touched or felt. A share certificate represents the shares. But a sure is something available in the dematerialised form, which is intangible. This Dematerialised security is held in the Demat account of an investor. To hold on to this security, it is essential to have a dematerialised account in the first place.
Features of a demat account
After having understood the concept of the Demat account, it is now essential to understand specific characteristics and features which are exclusively available in this kind of account. The same has been given in the following way for the readers’ reference.
Helps in holding the securities
All the securities in the form of share capital and bonds are stored in the investor’s Demat account. It is an account to which the shows are credited and debited. All the transactions on the stock exchange by an investor are executed through the provision of a Demat account only.
Demat account is the only platform that can hold security without any limitations. Like a particular bank that holds the balance of a customer, a demat account holds the balance of securities of the customer. Note reading on the stock exchange can be executed unless a demat account has not been created.
A depository creates a Demat account.
Demat account is constructive, and depository helps strengthen the functioning of this account. The depositary is considered the platform on which the Demat account operates. It conducts all the transactions related to the demat account. Everything from the Purchase and the sale of securities to the transfer of securities from one account to another is approved by the depositary.
This depositary is very important for ensuring that all the transactions are conducted under India’s securities and exchange board. Note transactions on the Demat account can be conducted without getting approval from the depository.
A demat account is a kind of loan
Demat accounts can also act as your bank and provide the loan facility. The choice in the Demat account can be pledged against for raising some amount. This helps to release the money instantly without indulging in any formalities of financial institutions and banking institutions.
It is a quick process that has to be regulated over some time in one way or the other. That is why the Demat account is considered a bundle of rights available to every investor once he starts investing in shares.
Conclusion
It has to be concluded ultimately that the Demat account is beneficial for the long term perspective of the investor. It is only because of the availability of a demat account that different operations can be conducted over some time. Join 5Paisa today for enjoying trading with your demat account.