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What is a Demat Account? Meaning, Features & Benefits
By Bajaj Broking Team
February 03, 2026
8 mins read
Demat Account
Summary:
The main goal of this blog is to help investors understand the digital utility and importance of Demat accounts. We have explained the dematerialization process, history, how it works, charges, and types of accounts in detail. We also share the benefits of paperless trading and the necessary documents so that users can invest safely and manage their portfolios.
A Demat Account, which stands for "Dematerialised Account," is like a digital safe for your valuables. It keeps safe copies of computer records for stocks, bonds, mutual funds, ETFs, and other securities. Investors used paper certificates in the past, which could be lost, damaged, or fake. Everything is now kept online in a safe place.
With a demat account, there is no more going to the broker's office or carrying around stacks of paper. It's like switching from cash to a payment app—simple, quick, and safe. A Demat account makes it easier to keep track of and manage your investments, and every exchange becomes digital, swift and secure.
Put simply, this is an account for securities that works like a bank account; as opposed to money, this account stores your investments. Based on account and holding ease, a Demat account is a necessary requirement if you are investing in any stock market in India. A Demat account allows you to finish the transaction smoothly, keep records effortlessly, and with significant security on your holdings.
What is Dematerialisation?
Dematerialisation is a transition from paper share certificates to electronic records. Although it can seem complicated at first, the process is just simple. The secure entries in a Demat account serve as a substitute for physical certificates. This allows many investors to view and keep track of holdings all in one place.
The digital format also lowers the risk of loss or damage. It keeps records clear and organised. Over the years, dematerialisation has simply become a part of investing, as many other financial activities continue to move online.
History of Demat in India
Prior to 1996, the investment process involved physical share certificates, which were slow, prone to mistakes, and created risks for investors. National Securities Depository Limited (NSDL) entered the market in 1996 and cleared the way for investments to take place with a more electronic and secure way of storing securities.
After NSDL was established, the Central Depository Services Limited (CDSL) was also set up, which established a dual-depository system. Both NSDL and CDSL are regulated by SEBI and provide a secure way of keeping investor holdings through Depository Participants (DPs). Further advancement in technology allows faster trade settlements to take place and more retail investors to participate.
How Does a Demat Account Work?
You can use your trade account and bank account with a Demat account. With them together, buying is easy and doesn't require any paper. This is how it works:
Putting in an Order: Your trade app lets you put in an order to buy or sell. It's a lot like shopping online, but for shares.
Routes for Orders: Your broker, also known as a Depository Participant (DP), sends the order to the stock market. It takes almost no time at all.
Confirmation of the Transaction: Once the transaction is complete, the securities are added to (in case of buy order) or removed (in case of sell order) from your Demat account. You’ll get a notification on your linked devices.
Moving Money: The related bank account is in charge of moving money, which means that the amount used to buy and sell is transferred from and to the bank account.
Holding a Range of assets: You can hold mutual funds, exchange-traded funds (ETFs), bonds, non-convertible bonds, and government assets in addition to stocks in your demat account.
Importance of a Demat Account
A Demat account plays a key role in digital investing, and many people notice this as soon as they start using one. It keeps investments safe from loss or damage, since there is no paper to store or protect. It, thus, removes the paperwork, which keeps the overall process smooth.
You would need a Demat account to hold shares or apply for IPOs. The account clearly shows ownership and keeps your records clean. Also, all your holdings stay in one place, which makes tracking simple and stress-free. India currently follows T+1 settlement for most equities, helping you access your funds sooner.
Features of a Demat Account
With a Demat account, it's easy to manage your assets. The account is designed to be easy to use. Here is what a demat account has to offer:
Peace of mind and safety: The electronic form of your shares keeps them safe. You don't have to worry about losing paper certificates.
Market access: When you sell or buy securities, a demat account is needed to hold shares, whether for a single night or for years.
Simple to keep track of: All of your purchases show up in a single account. It's easy and quick to check them. The trades clear faster, and most of the time within a day.
Less expensive: Since everything is done online, there is less paperwork and fewer extra costs. It works well and doesn't cost too much.
Types of Demat Accounts
It depends on where you live and how you handle your money, and what kind of Demat account you open.
Regular Demat Account: For Indian citizens who want to trade in Indian markets. It's linked to your bank account right away.
Repatriable Demat Account: NRIs who want to invest in India but also move their money out of the country can open a repatriable demat account. It needs to connect to an NRE account.
Non-Repatriable Demat Account: This is also for NRIs, but the money stays in India. For things that happen in the country, it connects to an NRO account.
Picking the right account makes sure that money moves smoothly and that you follow FEMA rules.
Benefits of Demat Accounts
Having a Demat account changes how investors hold and keep track of their assets. It's quick, safe, and simple to use. It's useful because of these things:
Safety: When you store your stocks digitally, they are safe and can't be lost or damaged.
Easy Access: You can look at or change your accounts at any time and from any device.
Paperless Transactions: Everything is done online, from buying to selling. This saves time and effort.
Easy Tracking: All of your stocks show up in one view, which makes managing your portfolio easier.
Faster Transfers: Transfers between accounts happen quickly, which ensures that payments go smoothly.
Documents Required for Opening a Demat Account
To open a Demat account, ensure you have the following documents ready for a smooth and paperless application process:
PAN Card – Mandatory for identity and tax compliance.
Proof of Address – Aadhaar card, passport, driving licence, or utility bills (not older than 3 months).
Bank Account Proof – A cancelled cheque or recent bank statement for account linking.
Income Proof – Required if you wish to trade in derivatives (F&O); examples include salary slips, ITR, or bank statements.
Passport-size Photograph – For profile identification.
Signature on Plain Paper – Required for verification during KYC.
Most brokers now offer eKYC and video verification for a completely online and hassle-free onboarding process.
Demat Account Number and DP ID
There are two unique numbers in every Demat account that help you keep track of and manage your investments. The first is the Beneficiary ID, which is another name for the Demat Account Number. It's a 16-digit number that helps keep track of all your goods and is unique to your account.
The second is the DP ID, which stands for "Depository Participant ID." This is the number that NSDL or CDSL gives to your broker or Depository Participant. Together, they let people know which account to use for IPO allotments, share trades, and other things. You'll also need them to link accounts, get dividends, or manage the actions of a mutual fund.
Demat Account Charges
It might look like opening a Demat account is free, but there are a few small fees to keep in mind. To sum up quickly, here it is:
Fee to open an account: Many agents don't charge this fee, but some may charge a one-time amount to set up your account.
Annual Maintenance Charge: An AMC is a fee that is Broker-dependent and variable.
Transaction Fees: There is a small fee to sell stocks, DP/broker charges vary. Custodian fees aren't paid very often, but they might be for some securities.
Dematerialisation Fee: This fee is due when paper share certificates are turned into digital ones.
How to Use a Demat Account?
Using a Demat account is simple, even for first-time investors. Here’s a step-by-step guide:
Link with Trading and Bank Accounts: Your Demat account must be linked to a trading account (for executing orders) and a bank account (for fund transfers).
Log in to Broker Platform: Use your credentials to log in to the broker’s web portal or mobile app.
Place Buy or Sell Orders: Use the trading interface to place market or limit orders. On execution, securities are automatically credited or debited from your Demat account.
Monitor Portfolio: Access your dashboard to view real-time holdings, transaction history, and gain/loss summaries.
Receive Auto-Credits: Dividends, bonus shares, stock splits, or IPO allotments are directly credited to your Demat account. There’s no paperwork or physical follow-up needed.
The seamless integration of Demat with trading and banking functions ensures fast, paperless investing with complete transparency.
Frequently Ask Questions
Can Demat accounts be opened jointly?
Yes, you can open a joint Demat account with up to three people. All account holders must complete the KYC process.
What are the charges associated with Demat Accounts?
There may be account opening fees, annual maintenance charges (AMC), transaction fees (for selling), and occasional charges for dematerialisation or custody.
What is the use of a Demat Account?
A Demat account lets you safely hold, buy, sell, and manage securities like shares, ETFs, and mutual funds online.
Who can open a Demat account?
Any Indian resident or NRI above 18 years with a valid PAN and KYC documents can open a Demat account.
Can I open a Demat account without opening a trading account?
Yes, you can. But you will only be able to hold or transfer securities. To buy or sell them on the stock market, you’ll need a trading account too.
Is a Demat account compulsory to apply for an IPO?
Yes, a Demat account is required to receive IPO shares. The allotment and holding of IPO shares are done electronically.
What documents do I need to open a Demat account?
You need your PAN card, proof of ID and proof of residence, bank information, a passport-size photograph, and your signature. You also require proof of income if you want to trade in derivatives.
How long does it take to open a Demat account?
Once you submit a Demat account application, the Depository Participant will verify the KYC documents and check the submitted information. Once completed and all submitted data is validated, your application will be activated, and you will receive confirmation along with your unique Demat account number.
Can I transfer shares from one Demat account to another?
Yes, shares can be transferred between Demat accounts. The transfer would be made either through the Delivery Instruction Slip (DIS) or via an online facility, such as CDSL or NSDL’s Speed-e platform. The transfer of securities is permitted between accounts, regardless of whether they are maintained with the same Depository Participant, made possible through the functions enabled by disclosures to the SEC through CDSL and NSDL.
What happens to my Demat account if I stop using it?
A Depository Participant will classify your Demat account as dormant if it has not been used for an extended period of time. In that case, you may be required to undergo a reactivation process, which involves updating KYC to re-initiate trade or access your Demat account.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Bajaj Broking Financial Services Ltd. (BFSL) makes no recommendations to buy or sell securities.
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Published Date :
03 Feb 2026
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