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Benefits of Opening a Demat account

What are the Benefits of Opening a Demat account

Demat account has brought a significant change in market practices and there are various benefits of opening a Demat Account for the companies, investors and brokers like –

  • Significantly reduces the brokerage charges.
  • Eliminates the risks involved with physical certificates like forgery, loss, theft, damage of certificates etc.
  • There is no paperwork involved, which has greatly reduced the time required to clear each transaction.
  • Traders don’t need to visit the stock market again and again, as they can operate from anywhere as the system has become electronic Shares that arise out of splitting, mergers, consolidations are automatically credited in the Demat account.
  • All transactions take place through the depository participant; hence the need of communication with each and every company in which the trader holds securities is eliminated.
  • The system reduces the cost incurred by the company in issuing and distributing shares due to elimination of all paperwork. It also improves the efficiency of the company’s secretarial department.

The brokers don’t have to face forgery or delivery problems.

How does Dematerialization take place?

Whenever an investor wishes to dematerialize the securities, he or she has to fill a Demat request form (DRF) provided by the depository participant (DP) for dematerialisation of shares.The form is submitted along with the physical certificates. Each security comes with a unique International securities identification number (ISIN) & each different ISIN requires a different request form to be furnished. The process of Dematerialization involves the following steps:

  • Investor submits Physical Share Certificates with the DRF to the DP.
  • The depository is intimated of the request by the DP.
  • The certificates are submitted to the Issuer company’s registrar.
  • The Dematerialization request is confirmed by the registrar Registrar than updates accounts after Dematerialization and informs the depository of the completion of the process.
  • Depository updates accounts and information is passed on to the DP Investor’s Demat account is updated by the DP.

Benefits of Opening a Demat account

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