The concept of demat accounts was introduced in India in the year 1996. Prior to this when digitalisation was not a norm, shares and securities were kept, issued, and traded in physical form. During that time, traders had to undergo a lot of hassles for keeping the shares safe from theft, robbery, damage or any other kind of loss.
Introduction of demat account brought a lot of relief to the traders and also led to the boom in the stock market. One of the biggest benefits of demat account is that it allows traders and investors to hold their shares and securities in electronic format. This makes the entire process of trading, investing, holding and monitoring shares and securities much faster, easier, cost-efficient and convenient.
Let us glance through some more benefits of demat account.
- Lower Risks
Physical securities carry a huge risk of theft, robbery and damage. With a demat account, such risk is completely eliminated as there is no chance that your certificates will be stolen or forged because they are stored in electronic form. Moreover, with a demat account, you also eliminate the risk of fake securities and bad deliveries.
- Cost Saving
Since there are no physical securities involved, demat account is free of several additional costs such as stamp duty charges, handling charges and other similar expenses. This reduces the overall cost for the investor and makes demat account cost-efficient.
- Time Saving
Demat account completely eliminates the paperwork which leads to completing a transaction much faster than before. The saved time helps the investor to buy and sell more securities in a shorter time and with greater efficiency.
- Seamless Process
Demat account combined with internet banking and online trading makes the entire process of trading very convenient and hassle-free. It creates a seamless chain of transactions that are quick and efficient. When you purchase shares in your trading account, your bank account is automatically debited and subsequently your demat account is automatically credited without your personal involvement. Same is the case when you sell shares from your trading account.
- Operate with a Single Account
Demat account gives you the flexibility to hold and track all your investments through a single account. You no longer need to open separate accounts for buying NCDs, tax-free bonds, etc. Most of your instruments can be held at one single place i.e. your demat account. It also makes it convenient to track the performance of your portfolio.
- Resolves Odd Lot Problem
Prior to the introduction of demat account, traders could not buy or sell share with odd lots. They had to buy or sell a specified quantity which used to be a major hassle for them in physical certificates. Demat account addresses this issue and allows traders to buy or sell even a single share.
- Immediate Transfer of Shares
Before demat accounts came into existence, shares had to be sent to the company or the registrar in order to get the shares transferred in your name. This process was time-consuming and sometimes took months to get the shares transferred. With a demat account, shares can be immediately transferred within no time. Moreover, now you do not have to pay for stamp duty on transfer of securities.
All the above-mentioned benefits make the demat account a simple, hassle-free and lucrative option.
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