A few weeks back, I published The Explainer: Stock Markets – Part I on this blog. The post generated tremendous positive reviews; however, a few readers commented that they could not understand the note on demat account.
About two days after I published that post, I received feedback from Mahip Rekhani, a management graduate from the Indian Institute of Management Indore (IIM-I). After reading the comments on the post, he sent me a mail with a short explanation of demat account.
Find below Mahip’s wonderful short note on demat account, aimed at helping confused readers. His note is brief and informative.
(a) Demat is nothing but holding your physical shares in a soft copy form, i.e. earlier one used to get hard copy of the shares, now they are issued in soft copy form.
(b) Demat account in India is opened with the National Securities Depositary Limited (NSDL) and Central Depositary Services Limited (CDSL).
(c) Opening a demat account can be done through a depository participant (basically, an agent), which can be a bank or a broking house.
(d) Your demat account is mobile, i.e. it is not bound with an agent and can be shifted to another service provider.
(e) In addition to a demat account, an agent may also provide an investor with a trading account in order to facilitate buying or selling of shares.
You can check out Mahip Rekhani’s Facebook profile here.
My profound thanks to Mahip!