Difference Between Demat Account and Bank Account
Today, it is essential to understand the different categories of financial accounts. This is because they are required for management and investing to function properly. Most people usually talk about two accounts, the Demat account and the bank account. These two are necessary for financial management. However, they have unique roles and properties. A bank account is used for everyday banking operations such as deposits and withdrawals, bill payments, and savings growth. Whereas, a Demat account is primarily for electronic holding and trading of securities such as shares or stocks and mutual bonds. However, their functions are different: one is for facilitating financial transactions and maintaining liquidity; the other is used for secure management of an investment portfolio. In this blog, you will understand both financial accounts in detail.
Key Highlights
- A bank account is a primary financial tool used by individuals and business entities to handle their money properly.
- A Dematerialized Account (Demat account) is vital to the investor. It allows for the paper-frее holding and exchanging of bonds, stocks, and mutual funds electronically.
- Bank accounts and Demat accounts are financial instruments offering different features in terms of accessibility, regulation, purpose, interest, etc.
A Demat account and a bank account function similarly, but cash holdings and financial securities are the main differences.
Table of Contents
What is a Bank Account?
A bank account is a primary financial tool used by individuals and business entities to handle their money properly. They are available in various types like saving accounts, current accounts, and fixed deposit accounts. A savings account is meant for individuals to deposit their money, earn interest, and be able to withdraw it whenever they need it. Businesses and professionals are the target groups of current accounts that enable them to make unlimited withdrawals during heavy trading sessions. Fixed deposit accounts provide desirable interest rates for specified time-frames when depositing the capital. Bank accounts ensure there is convenience in accessing funds via online banking, ATMs, and branches. You can easily withdraw money to settle recurrent utility bills or make transfers among other uses like creating savings accounts.
What is a Demat Account?
A Dematerialized Account (Demat account) is vital to the investor. It allows for the paper-frее holding and exchanging of bonds, stocks, and mutual funds electronically. This dispenses with the necessity of physical certificates by providing a secure and easier method for keeping investments. However, there are some documents that people need to have when they want to open a Demat account. They include identification proof, a PAN card, and bank information. Additionally, they are regulated by depositories like NSDL and CDSL. These accounts provide transparency and work well in terms of securities transactions. Demat accounts are a way of buying, selling, and transferring securities and this ensures that all transactions settle fast with no paperwork involved.
Demat Account vs Bank Account
Though bank accounts and Demat accounts are financial instruments, they are different in terms of usage and other factors. Let’s discuss them in detail.
| Aspect | Bank Account | Demat Account |
| Purpose | Manages everyday banking transactions | Hold and trade securities electronically |
| Usage | Depositing, withdrawing money, paying bills | Buying, selling, and holding stocks, bonds, etc. |
| Type of Account | Savings, Current, Fixed Deposit | Dematerialized account for securities |
| Financial Transaction | Facilitates liquidity and cash management | Facilitates electronic storage and transfer of securities |
| Interest | Earns interest (savings, fixed deposits) | Demat account do not generate interest |
| Accessibility | Accessible via ATMs, branches, online | Accessible via brokerage platforms |
| Regulatory Body | Regulated by Reserve Bank of India | Regulated by the Securities and Exchange Board of India |
| Opening Process | Requires identity proof, address proof, etc. | Requires identity proof, PAN card, and bank details |
| Fees | May include maintenance fees, transaction fees | Annual maintenance fee and transaction charges |
| Statements | Bank statements showing transactions | Holding statements showing securities held |
How Does the Entire Process Work?
Demat and bank accounts function similarly, but the significant difference is cash holdings and financial securities. You can open a Demat account with a bank, financial firm, or online broker service. In addition, there are the latest offers available for users to open a Demat account.
Bank accounts are an essential source for loans and transactions. You can also make investments through different bank schemes. In the difference between a Demat account and a bank account, you can check the functionality of each account.
Banks in India can be opened by private banks, government banks, or foreign and national banks. Citizens of India, as well as NRIs, can open bank accounts in India. In addition, several new online platforms provide a way to save your money and use it for various transactions.
Conclusion
Whether a bank service or a Demat account, both services have made online transfers of money and shares quick and effortless. It makes the trading and banking services most desirable and necessary for every individual. In addition, many big companies offer a wallet and saving account feature to make their customer’s transactions seamless. Moreover, the stockbroker has a wallet-like feature that saves the amount you add. This results in making your transaction process easier.
There is a difference between a Demat account and a bank account, but both accounts help you essentially in stock trading. I hope you found this helpful article to understand the Demat account vs. bank account in detail.
FAQs on Demat Account and Bank Account
To open a Demat account first, you need to choose a stockbroker firm. There are plenty of stockbrokers who can provide you with an online Demat account. Then, all you need to do is register and submit the required documents and do Online KYC for opening your Demat account.
A Demat account is a storage facility for your money market assets. For example, you can store equity, F&O, Mutual funds, Commodities, etc. You can also overview your asset and plan accordingly. There are many advantages to help you grow and make your investment value over time.
Depending upon your need both have their own benefits and requirements. However, you need to have a bank account in order to add funds in your stock broker platform.
Yes, you need to link your Demat account to transfer your fund to buy or sell shares. The Demat account is the best way to invest and grow in the financial market in India.
A Demat account stores your securities, and a bank account holds your money in electronic form, respectively. Therefore, you need to link both accounts to make your trade and investments easy and convenient.