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Finance

Different Types of Demat Accounts in India

A Demat, or a Dematerialized account, holds shares in digital and electronic format. In simple words, a Demat account lets you buy shares and store them properly. A Demat account is pretty similar to your bank account. Note that with a Demat account, you can invest in shares, bonds, mutual funds, EPFs, government securities, etc.

A Demat account is an integral part of share trading. For instance, when you buy shares, they will be credited to your account. On the other hand, when you sell shares, they will be debited from your Demat account. Moreover, any shares you are holding in the paper can be dematerialized and stored in electronic form in the Demat account.

One of the core relationships that are created between the broker and the trader is using a Demat account. It is mandatory for you to open a Demat account along with the trading account so that you can purchase, sell and hold securities in the stock market.

By understanding the types of Demat accounts, you can participate in the stock market meaningfully. You can consult with your bank to open a free Demat account. Here are the types of Demat accounts you should be aware of.

Overview of a Demat Account

Demat is the acronym for dematerialized. In simple terms, the securities present in a Demat account is electronic in nature. These electronic securities are not only easy to access but also safer. Prior to 1996, the situation was completely different.

During that time, the Demat account was not introduced. As a result, traders had to carry physical copies of their trades which needed to be verified at every point. These physical copies of trade often presented the traders with various issues.

At that time, trading was not only tedious, but also occurred at a slow pace. Due to the burden of managing securities, first-time traders used to feel demotivated. With these things in the mind, let’s take a glance at the various types of Demat accounts.

Regular Demat Account

A regular Demat account is ideal for those traders who are Indian citizens and reside in India. In India, the regular Demat account service is usually offered by depositories like CDSL and NSDL. They offer these services through stock brokers, intermediaries, depository participants, etc.

The charges of the Demat accounts vary as per the volume of shares in the account. Furthermore, the charges vary as per the type of Demat account subscribed to, along with the terms and conditions laid by the depository and the depository participant.

A regular Demat account ensures that your trading operations are simpler. The transfer of shares can be executed easier than ever, and the transactions can be completed within a few hours. And since the regular Demat account allows you to hold shares in the electronic format, there are fewer chances of errors.

A regular Demat account has made trading simpler. This is because it has eliminated strenuous processes like selling shares in odd lots, buying and pasting share market stamps, etc. As a regular Demat account holder, you can transfer your holdings from the existing Demat account to another institution without any charge.

Repatriable Demat Account

Customary to its name, a repatriable Demat account is for NRIs. As an NRI, you can make investments in the Indian share market with the help of a repatriable Demat account. Moreover, the transactions will reflect in your Demat account immediately.

This type of Demat account is a practical option for NRIs as it facilitates funds transfer to foreign nations. If you want to open a repatriable Demat account, you should have an NRE account. An NRE account, also known as a Non-Residential External Account, is exclusively for NRIs.

The RBI guidelines mandate NRIs to open a trading account with a designated institution authorized by the RBI. The procedure of opening a repatriable Demat account is a bit lengthy, and the Indian Embassy in your respective country will inform you about it.

Non-Repatriable Demat Account

Note that a non-repatriable Demat account is for the NRIs too. But in this case, you cannot transfer the funds, and this account needs an NRO bank account. An NRI, with earnings both in India and abroad, usually faces a lot of difficulties in managing their finances.

They also find it tough to monitor their bank accounts in a different nation. With NRO and NRE Demat accounts, they can have added peace of mind. However, you should be aware of the RBI guidelines before opening a non-repatriable Demat account.

As per the RBI, an NRI can only hold up to 5% of the paid-up capital in the Indian company. You can invest in IPOs on a repatriable basis by using the NRE Demat account.

By knowing the varied types of Demat accounts, you can trade easily.

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