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The Various Types of Trading Account in India

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The Various Types of Trading Account in India

An investor who invests in the equity market knows about the importance of a demat account. It allows the investor to hold their securities in an electronic form instead of physical form. The word “ Demat “is a short form of dematerialization. It is the process of converting physical shares into digital or electronic form. Demat stands for dematerialization, that means the process of converting physical shares into electronic form. It allows an investor to perform paperless trade in shares. Earlier, the shares were traded in their physical form through share certificates. An investor had to submit these certificates to the broker for further trading and the companies for getting the shares registered in their names. As every share transaction required physical transfer, leaving room for a lot of work and errors. This also provides room for forgery, fraud, fake, and duplication of certificates. Due to these reasons, investors prefer a Demat account. Let’s look at the features of it:  

  • The various risks associated with physical certificates such as forgery, thefts are eliminated.  
  • Quick and shorter settlements enhance liquidity.  
  •  Investors who hold shares in demat accounts are entitled to all the rights available to shareholders as in the case of physical shares.  
  • There is no stamp duty on transfer of securities held in demat form.  
  •  There is an auto credit system that allows public issue refunds to the bank account directly.   
  • Get quick holding and transaction confirmation through an email.  
  • All types of investments like shares, mutual funds, government securities, etc can be transferred or pooled into respective demat account. 
  • As the shares in Demat exist in electronic form, it means one can access them through multiple channels over various electronic platforms like mobiles, tablets, laptops, desktops, etc.  
  • Through speed e facility provided by NSDL allows an investor to place delivery instructions to their DPs.  

Before opening an account, an investor should be aware of various demat accounts. Let’s look at the various type of account:  

  1. Regular Demat Account: It is an account which is mainly operated by a resident of India.  
  2. Repatriable account: It is operated by non-resident IndiaThis account helps in allowing the fund transfers abroad. But to do so, one must have an NRI bank account.  
  3. Non- Repatriable account: This account is also for NRIs but does not allow fund transfer abroad. 

Depending upon one’s situation one can open any of these accounts. Let’s look at the procedures of opening of an account :  

  • First of all, select a broker, financial institutions or any authorized bank to open the account. But one should take a deep look into brokerage charges, annual charges and leverage provided before selecting it,  
  • Further submit a dully filled account opening form and then further KYC form.  
  • Apart from that, one needs to attach copies of residence proof, Id proof, Pan card, and passport size photographs.  
  • An investor needs to carry the original copies during the time of verification purposes.  
  • He/she also needs to give a cancelled cheque of their own account.  
  • he/she needs to sign an e agreement that will mention all the rules, regulations, and rights of the holder of the account. Before signing the agreement, one should read the document carefully.  
  • Afterward, the respective investor account is open with a unique client ID received from DP.  
  • It is mainly a 16-digit number in which the first 8 digits are depository id and the other 8 digits are client id.  
  • They also provide instruction slips which will be quite useful in the transfer and purchase of shares.  
  • An investor can open multiple accounts with one or more DPs.  
  • Intraday traders need to sign a power of attorney at the time of opening an account. It enables them to conduct transactions on your behalf.  

Let’s look at the advantage of the demat account:  

  • It is quite easy to maintain, manage, and keep a record of shares in a demat account. 
  • All the extra charges such as stamp duty, handling charges are eliminated in it.  
  • There is no specific limit to the number of shares to be traded by investors.  
  • It provides hassle-free, less time consuming, and quick settlement compared to a physical account.  
  • After the dematerialization process, the quality of share trading has improved allowing more foreign capital to India.  

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*Disclaimer: investment in securities market are subject to market risks, read all the related documents carefully before investing

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