Last Updated: Apr 29, 2024 Value Broking 8 Mins 1.7K

A Demat account works like a bank where you can store various types of securities once you have invested in them—Demat accounts store share certificates and other securities in dematerialized form. A Demat account helps to keep your shares in secure locations away from tampering. All transactions and holding saves are protected by the government and encrypted. The technology of the Depository system is regularly checked and updated.

What are the Aims and Objectives of Owning a Demat Account?

Demat accounts have changed the meaning of trading in a smooth and paperless manner. However, a few charges like annual maintenance, translation, and withdrawal fees whenever you withdraw your money.

The account statement reflects your Demat account’s transaction debit and credit history. Through holdings overview, you can come to know all the financial holdings in your Demat account. This function will display the date, time, locked-in balance, and Current rates of your Financial holdings. The account statement reflects your Demat account’s transaction debit and credit history. 

The account statement reflects your Demat account’s transaction debit and credit history. The account statement reflects your Demat account’s transaction debit and credit history.

An investor should monitor their Demat account. Monitoring your Demat account will give you an aim and objective for your Demat account, prevent any losses, and help calculate the amount you made profit or loss.

Traditional methods of trading were costly and painful. The physical maintenance of shares and financial assets was costly. The stamp duty charge and security required to authenticate your security were painful. The Demat account aims to replace these methods.

Demat accounts provide opportunities for investors. With Demat accounts, you can  Mutual Funds, Future & Options, Commodities, and many more Financial assets under a single roof.

Apart from these, the aims and objectives of a Demat account, there are more needs and importance of a Demat account.

A Demat account is a flexible account that passes on to your nominee or someone you wish to share your holdings with. For example, suppose your father decided to pass on his shares and hold them to you. But, unfortunately, you don’t know the Stock market or Financial stuff. 

You go to a broker service. There you will know about Demat accounts and their benefits. You decided to open a Demat account. As per the instruction by the Stockbroker, you will follow the instruction to open the Demat account and receive all the holdings from your father’s holdings. To hold and keep these shares for the years to come, you don’t need a training account.

If you understand the need & importance of a Demat account, you can easily come to know why you should open a Demat account. To further explain the need and importance of a Demat account, you can check the following key points.

Global Capital

You can facilitate overseas investors’ entry into the equity market through Demat accounts. As a result, foreign investors will boost the financial growth of the Indian economy.

Easy To Use

Opening a Demat account through a bank or a broker, you will get a Unique Identification Number (UIN) required for buying and selling shares.

Improved Portfolio Management

A Demat account enables portfolio management to be easy and flexible. You can track and manage your investments, gains, and losses with the click of a button. 

Loan Facility Against Securities

Having a Demat account is a financial asset. For example, holding securities via a Demat account can easily lend you a loan from any financial institute or lender. These holdings are used as collateral.

Instant Buying & Selling

It is now much faster to exchange stocks through an online Demat account. Previously, the physical exchange of stocks would take around a month, which resulted in a decrease in the cost of the stock, and transfers were in physical form, which causes more money to maintain and exchange stocks.

Rest Period

Due to some reason, if the investor wants to hold their trading work, they can simply freeze or keep their accounts inoperative for a certain period without being liable for any penalty.

How does a Demat Account work?

Trading using a Demat account is identical to trading in person, except that a Demat account is electronic. You start your trade by entering an order into your online trading account. Both your trading and Demat accounts must be linked for this very reason. When an order is placed, it is processed by the exchange. Before final processing of the order, the Demat account information, the market price of shares, and the availability of shares are confirmed. Following the conclusion of the procedure, the shares are represented in your statement of holdings. When a shareholder desires to sell shares, a delivery instruction letter detailing the stock must be issued. 

According to the Depository Act of 1996, having a Demat account is required. In order to enable this, the National Securities Depository Limited (NSDL) was established in 1996. Three years later, Central Depository Services Limited (CDSL) became the second such organization. The two agencies work together as the custodians of all electronic securities owned by investors. They provide the Demat account opening service through a number of depository partners, including Angel One. SEBI has registered both agencies and their affiliate brokers.

Objectives of Demat Account

A Demat account Eliminates the Risk of Paper-Based Shares Certificates

Opening a Demat account can help you to store all your shares and securities digitally in a safe and secure digital repository. 

Stores Various Investments

A Demat account can also hold multiple assets like mutual funds, bonds, securities, and many more.

Convenient Share Storage and Transfer

A Demat account helps you to store any number of shares so that you can trade in bulk and track the details of all your shares held in a Demat account. It also helps in a smooth transfer of shares while trading online.


The Demat account also provides the nomination facility as per the process given by the depository institution. 

Why do you need a Demat account?

If you want to start trading, you must have a Demat account. You cannot start trading without having one.

A Demat account Provides you Safety

You won’t have to deal with any fake or phony stock certificates. Each and every record of shares in your account is real.

Low Cost

Additional costs associated with actual share certificates, such as handling fees and stamp taxes, are eliminated with a Demat account. As a result, there will be decreased costs and huge savings.


You may view all of the data linked with a Demat account from anywhere and anytime because they are all online and electronic.

Multiple securities

With a Demat account, you can store multiple securities like bonds, debt securities, mutual funds, etc.

How to open a Demat Account

You can follow the steps given below to open a Demat account.

  • Choose a Depository Participant (DP) with whom you want to open a Demat account.
  • Fill out an account opening form and attach your passport size photographs.
  • Attach your PAN and Aadhar card details.
  • The DP provides you with a copy of the rules and regulations and the necessary changes that you need to pay.
  • During In-person Verification, a DP will contact you to verify the details and documents.
  • After your In-person verification, you will get an account number from the DP from which you can access your Demat Account online.

Tips to Choose the Best Demat Account

Check to see if the account maintenance fees are reasonable

Regardless of your transactional activity, maintaining a Demat account incurs yearly fees. As a result, you must investigate the various account maintenance charges associated with the Demat account and select the most cost-effective account.

Inquire about the procedure of creating an account

Your DP’s Demat account opening procedure should be simple and rapid. According to SEBI requirements, opening a Demat account is a complex process. With the use of e-KYC, the depository participant may make it easier.

Look for a unified interface for trading and banking

Depository participants also provide Demat accounts that function as trading accounts, allowing for the smooth movement of funds during the sale or purchase of shares and securities. An interface between the two accounts simplifies and saves money on transactions.

Check to see if the DP has specialized analytics for Demat account holdings

You may boost your profits by using online analytics that are customized based on your choice of shares and security and your investing habits. When looking for the best Demat account, look for value enhancements like these.

Furthermore, characteristics like a reduced turnaround time (TAT) for share dematerialization let you evaluate the DP’s dedication to supporting investors.


Before Demat, the securities investing procedure was extremely time-consuming and involved a lot of paperwork. Managing all of the paper securities before 1996 was expensive and time-consuming. In addition, there were other risks involved with it, such as theft and bodily harm. The whole trading experience has become more accessible and less time-consuming due to dematerialization. Above all, it makes purchasing and selling stocks safer and more secure. However, to choose the correct service provider, you must first define your goals and objectives.

Frequently Asked Questions (FAQs)

Opening a Demat account for minors is not a tedious task, but it requires a parent or guardian to operate on behalf of the minor.

Yes, you can change addresses in your Demat account through any official Address proof such as Electricity bill, Aadhar Card, etc.

An investor needs to open a Demat account on CDSL or NSDL through a Stockbroker. They help in opening and maintaining your Demat account.

Demat account openings require a photo ID, address proof (Aadhar card, passport, ration card, DL, Bank attested statement, Electricity bill, and phone bill), and a passport size photograph.

Electronic storage is the best way to facilitate electronic settlement and trades through your online Demat account.

To participate in the Indian Stock Market trading activity, you need to have two accounts, i.e., 1. A Demat account. 2. A Trading account. Both are link accounts and help investors maintain records and make trade easy.

Demat account is crucial as it facilitates paperless trading, safe storage of securities, easy access to holdings, quick transfers, and simplifies the overall investment process.

Demat account features include electronic storage of securities, seamless transfer of shares, reduced paperwork, instant updates on transactions, and easy accessibility to account details.