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A demat account is a type of account that allows investors to hold their securities, such as shares, bonds, mutual funds, etc., in an electronic or dematerialized form. A demat account eliminates the need for physical certificates and reduces the risk of theft, loss, or damage of securities. A demat account also facilitates faster and easier transactions, as well as lower costs and taxes. A demat account is opened with a depository participant (DP), which is an intermediary between the investor and the depository. The depository is an institution that holds the securities of the investors in electronic form. There are two depositories in India: National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL). Let us get aware of Ledger Balance in Demat Account in this article.
A demat account has two types of balances: securities balance and ledger balance. The securities balance shows the number and value of securities held by the investor in the demat account. The ledger balance shows the amount of money available in the demat account for buying or selling securities.
The ledger balance in a demat account is calculated at the end of each business day by the DP. It reflects the inflow and outflow of cash in the demat account due to various transactions, such as:
The ledger balance can be positive, negative, or zero. A positive means that the investor has surplus funds in the demat account that can be used for buying securities or transferred to a bank account. A negative ledger balance in demat account means that the investor has a deficit in the demat account that needs to be covered by depositing funds from a bank account or selling securities. A zero ledger balance means that the investor has no funds in the demat account.
The ledger balance in a demat account is different from the available balance or margin balance. The available balance is the amount of money that the investor can use for trading on a given day. The available balance may be higher or lower than the ledger balance, depending on factors such as:
The margin balance is the amount of money that the investor has to maintain as a security deposit with the DP or broker for availing margin trading facility. Margin trading allows investors to buy or sell securities by paying only a fraction of the total value, while borrowing the rest from the DP or broker. Margin trading enables investors to leverage their capital and increase their returns, but also involves higher risk and interest cost.
The ledger balance is important for investors to keep track of their cash position and financial transactions. The ledger balance helps investors to:
The ledger balance in a demat account can be accessed by investors through various modes, such as:
The ledger balance can also be verified by investors by reconciling it with their bank account statement and transaction confirmation slips. Investors should regularly check their ledger balance and report any discrepancy or error to their DP or broker as soon as possible.
In conclusion, the ledger balance is a daily record of all cash transactions related to securities in an electronic form. It shows the amount of money available or required in the demat account at the end of each business day. It is useful for investors to manage their finances and investments effectively.
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