November 11, 2025
6 mins read
A demat account works very much like an online wallet. Just like Paytm or Google Pay allows you to pay for things without carrying cash, a demat account allows you to keep your shares in a safe electronic form. You can easily buy or sell shares without ever handling paper certificates.
A trading account is also needed along with a demat account. The demat account is where your shares are stored, while the trading account is the tool that helps you buy and sell those shares in the stock market. Without these two accounts, you cannot take part in share trading today.
The word “Demat” comes from “Dematerialised.” In simple words, it means converting physical things into digital form. A demat account is an account where your shares and other securities are kept electronically.
Think of it this way: if you have photos on your phone, you do not need to carry photo albums everywhere. The photos are safe, stored, and easy to share when needed. Similarly, a demat account keeps your investments safe in electronic form and makes it easy for you to access them at any time.
Here are the main benefits of a demat account:
Safety: You don’t need to worry about losing or damaging paper share certificates.
Convenience: You can buy and sell shares directly from home through your computer or phone.
Fast Transactions: Earlier, share transfers took weeks. Now, everything happens in a few days.
One Account, Many Investments: Not just shares, but bonds, mutual funds, and ETFs can all be kept in the same account.
So, instead of holding many paper documents, all your investments stay in one place, making life simpler.
Operating a demat account is very straightforward. Once your account is active, you just need to learn how to use it carefully. Below are the main functions explained step by step:
Login to your account Your Depository Participant (DP) will give you a username and password to log in through their website or app.
Check holdings and statements Inside your account, you can see how many shares you own, when you bought them, and their current value. Statements help you keep track of your progress.
Buy shares To buy shares, you place a “buy order” on your broker’s platform. Once the deal is completed, the shares are added to your demat account.
Sell shares To sell, you place a “sell order.” After the sale is confirmed, the money is transferred to your bank account.
Update personal details If you change your phone number, bank details, or address, you must update it with your DP so that you don’t miss important updates.
Pledge or unpledge shares Shares can be used as a guarantee (collateral) to take loans. Later, once you repay the loan, you can “unpledge” them.
Track company actions Sometimes companies reward shareholders by giving extra shares (bonus issue) or paying dividends. These benefits directly show in your demat account.
Keep your account secure Always use strong passwords, turn on two-factor authentication, and avoid sharing login details.
By following these steps, your demat account becomes a powerful tool to manage all your investments safely.
Let us now look at the process in a clear sequence.
To start, you need to choose a Depository Participant (DP). This can be a bank or a brokerage firm that is registered with NSDL or CDSL, the two main depositories in India.
You fill up a form, submit KYC documents (ID proof, PAN card, address proof, and a photo), and complete in-person verification. Once approved, you receive a client ID and password.
Your demat account must be connected to a trading account. The trading account lets you place buy and sell orders, while the demat account stores the shares.
You should also connect it with your savings or current bank account for smooth money transfers.
Before buying, you must transfer money into your trading account. This balance is then used to purchase shares. The bought shares are automatically added to your demat account.
Step 4 – Place Buy and Sell Orders
Now, you are ready to trade. When you place a buy order, the system matches it with a seller’s order. If both prices match, the trade happens.
The shares move into your demat account within two working days (T+2). Similarly, when you sell, the shares leave your account, and the money comes to your bank account.
By repeating these steps, you can trade regularly and grow your portfolio.
To understand demat accounts better, here are some important words explained simply:
Dematerialise Securities: Converting paper shares into digital form.
Rematerialise Securities: Changing digital shares back into paper. This is rare but possible if you submit a Rematerialisation Request Form (RRF).
Central Depositories: Organisations that keep records of all demat accounts. In India, there are two – NSDL and CDSL.
Depository Participants (DPs): Agents who help investors open and manage demat accounts. Examples are banks or stock brokers.
Electronic Certificate: A digital proof that you own certain shares.
Portfolio Holding: The collection of all your investments – shares, bonds, mutual funds, ETFs – kept in your demat account.
Learning these terms will help you read account statements and understand trading better.
Like most services, using a demat account comes with some charges. It is important to know them in advance so you can plan your money wisely.
Account Opening Fee: Some DPs charge for opening, while others may offer it free.
Annual Maintenance Charges (AMC): A yearly fee, usually between ₹300 to ₹800, to keep the account active.
Transaction Charges: A small fee is taken every time you buy or sell shares.
Dematerialisation or Rematerialisation Charges: Fees for converting physical shares into electronic form or vice versa.
Though these charges may look small, they can add up if you trade often. Knowing them helps you avoid surprises later.
Additional Read: What Is Collateral Amount In Demat Account
To sum up, a demat account has changed the way people trade in the stock market. It has made the process faster, safer, and more convenient. With a demat account, there is no need to worry about losing paper certificates. Everything is digital, easy to manage, and quick to access.
However, remember that a demat account alone is not enough. You also need a trading account linked to it to buy and sell shares. Together, these accounts make you ready to take part in the stock market.
Share this article: 
No result found
Open a Demat account with a Depository Participant (DP), complete verification, and get your client ID and password. Log in, and you can start buying and selling securities online.
Yes, a Demat account is mandatory for trading shares in the stock market, as it holds your securities in electronic form.
Yes, it is compulsory to use a Demat account for trading and holding securities in electronic form in the stock market.
Yes, your money is safe in a Demat account as it securely stores your securities electronically, reducing the risk of theft or loss.
Yes, linking your bank account to your Demat account is necessary for seamless transactions, including buying and selling securities.
No, only you can operate your Demat account unless you provide a power of attorney to someone else, authorizing them to act on your behalf.
Disclaimer :
The information on this website is provided on "AS IS" basis. Bajaj Broking (BFSL) does not warrant the accuracy of the information given herein, either expressly or impliedly, for any particular purpose and expressly disclaims any warranties of merchantability or suitability for any particular purpose. While BFSL strives to ensure accuracy, it does not guarantee the completeness, reliability, or timeliness of the information. Users are advised to independently verify details and stay updated with any changes.
The information provided on this website is for general informational purposes only and is subject to change without prior notice. BFSL shall not be responsible for any consequences arising from reliance on the information provided herein and shall not be held responsible for all or any actions that may subsequently result in any loss, damage and or liability. Interest rates, fees, and charges etc., are revised from time to time, for the latest details please refer to our Pricing page.
Neither the information, nor any opinion contained in this website constitutes a solicitation or offer by BFSL or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service.
BFSL is acting as distributor for non-broking products/ services such as IPO, Mutual Fund, Insurance, PMS, and NPS. These are not Exchange Traded Products. For more details on risk factors, terms and conditions please read the sales brochure carefully before investing.
Investments in the securities market are subject to market risk, read all related documents carefully before investing. This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.
For more disclaimer, check here : https://www.bajajbroking.in/disclaimer
Level up your stock market experience: Download the Bajaj Broking App for effortless investing and trading
Open Your Free Demat Account
Enjoy low brokerage on delivery trades
|
Please Enter Mobile Number
Open Your Free Demat Account
Enjoy low brokerage on delivery trades
|
