What is a Demat Account and how does it work? | Demat Account in India
What is a Demat Account and how does it work?
What is a Demat Account? | Demat Account kya hai?
Demat
account is the short form of Dematerialized Account, and the word
dematerialized means to convert any paper document into digital form, saved in
digital form. And account means keeping a record of things. Here the question is,
which thing is dematerialized, it belongs to the thing.
If we go
back in time, there was no digital banking at that time, that's why people used
to keep money in cash; all transactions were done in cash. The problem was that
people had to carry a lot and there used to be incidents of looting, money used
to get lost, or notes used to get old and torn. Seeing this, people had to
handle cash very carefully. If we talk about now, since the advent of digital
banking, everything has changed since then. Now very few people travel with
cash. In digital banking, we have money in digital format which is much safer
than cash.
In the same
way, earlier if someone used to buy a share, he would get a share certificate
which was in the form of paper, this certificate was the only proof that who
was the owner of the share. There were a lot of problems in this, such as share
certificates were lost, people used to make fake share certificates, or they
got spoiled by keeping for certificates. Due to these reasons, investors used
to face many problems. Because of all these problems, the government decided in
1996 that from now on all share certificates will be in digital form, meaning
all share certificates will now be dematerialized and will be saved in digital
form. And buy-sell of shares will also be in the account in digital form; this
account is called Demat account.
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Our money is
saved digitally and what we spend is recorded in our bank account. This means
such an account in which our purchased shares are saved in digital form and
where our buy-sell takes place, is a Demat account. So if you buy shares of any
company then it gets saved in your Demat account. You can think of a Demat
account as a part where only and only shares are kept. If you buy a share, then
the share gets saved by going to this page, even if you sell the share, it is
saved by exiting this page.
Why is Demat Account Important?
We just
learned that if we buy any share, then it gets saved in our Demat account. If
we want to buy and keep shares of any company, then we have to open a Demat
account and without a Demat account, we cannot buy-sell shares.
Where Does Demat Account Get Open?
Just like
our bank account is opened in any bank and the record of all our money is in
our bank account, in the same way, the Demat account is opened in a depository
company. Depository means the place to store and what is stored in the
depository? Yes, it's shares. Just a small difference is that there are
hundreds of banks in India where we can get our bank account opened, but for
the Demat account, there are only two depositories in India where we can get
the Demat account opened. The name of the first depository is CDSL {Central
Depository Service Limited} and the name of the second depository is NSDL
{National Securities Depository Limited}, our Demat account is opened only in
these two depositories.
Now this
question will come to your mind that how to open Demat accounts in brokerage
firms? Friends, we cannot get the account opened directly in the depository
like a bank account. Demat account is always opened through any brokerage firm.
Any brokerage firm is linked to these two depositories. There are lakhs of
brokerage firms in India, all of which are linked to either CDSL or NSDL, if
you open a Demat account from any brokerage firm then your account will be open
either in CDSL or in NSDL.
How much money does it cost to open a Demat
Account?
Every broker
has its charge for the Demat account, some broker charges up to 300, 500, 1000,
or even 1500, but in the middle of all this, such brokers open your Demat
account for free. Friends, if you find a broker who opens a Demat account for
free then be alert because the commission charges of many such brokers firms
are very high.
They open
our account for free because they know that later they will earn more money
from commission. So my opinion is that if a brokerage firm takes a little
charge, then no problem, you can open the account because you will have to pay
more commission for the year in order to save a little charge.
What is the best place to open a Demat Account? | Which broker chooses?
It is a bit
difficult to answer this question because this person depends on the person. It
is not at all necessary that you should like what I like, but I would like to
give you some advice from the point of view of my investing. Savings are more
important than investing, if you do not save money, then from where will you
get to invest? Warren Buffett has rightly said one thing that a rupee saved is
not at all different from a rupee earned.
I would like
to advise you to open such a Demat account in which the account opening fee may
be charged but the commission is very less so that you can save thousands and
lakhs of rupees in the long run. And you can earn more money by reinvesting
this saved money. Before taking any decision, especially money-related, you
must think about what will be the result in the long run. Believe me, with this
little thinking, you can save thousands of lakhs of rupees.
DISCLAIMER: This is an
Education program and is NOT registered under any SEBI rules. All the
information we provide is for educational purposes only and you should consult
your financial advisor before making any investment decision. Also, WE DO NOT
PROVIDE any kind of Stock Advice or Stock Advice or Portfolios. Description
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You!
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