Before 1996, people had to go through a lot of struggles for trading and investments. Shares, bonds, and other forms of securities were available in physical forms only. This invited a host of problems like the safety of the documents, their authenticity, a transfer from one place to another, and their access. Then, the Depository Act of 1996 was introduced, and it revamped the whole system. All the securities were now transformed into electronic forms, and this move was widely appreciated. To store all these information, every trader had to open a demat account. As the market regulator has made the Demat account mandatory, one must get the same opened with any of the leading stockbrokers who is licensed for the same. It proves much helpful if one wants to deal in this market and earn a good profit on a regular basis also. One can get this account opened with NSDL or CDSL as only they are authorized for account opening of Demat.
The procedure to open a lifetime free demat account is very simple. One needs to visit the Depository Participant (DP) and submit all the relevant documents. The DP will then perform verification, and if there are no issues, the demat account will be opened, and its reigns will be handed over to the account holder. But with time, the idea of having a demat account got its share of critics who pointed out the small, but obvious issues it was causing to its customers.
- The feather on the cap of a demat account is its ability to safeguard all the sensitive information, which would wreak havoc if it fell into the wrong hands. The faith of the customers on this type of account is the reason why it is accepted all over the world.
- Physical certificates carried with themselves a stamp duty of 0.5 percent. Since demat accounts store digital information, there is no fee levied on the possession of share, bonds, and mutual funds.
- People who prefer online trading without any expert help gain the most because of demat accounts. All the tasks related to trading can be done in seconds, and there is no need to visit a professional for odd jobs.
- There is no supervision over the actions of the stockbrokers, who oversee the decision-making in place of their customers who hold a demat account.
- A lot of agreements are necessary for the sound functioning of the process; this beats the vision of having a simple method.
- Demat accounts having non-liquid shares can never be closed, and the account holder must continue paying its various fees.
- Some investors do no close their demat account even after liquidating their holdings, without knowing they have to pay the charges even after this action.
Even though the demat account has some cons, its benefits outweigh them. Its utility cannot be undermined, which is why every trader has one. Constant efforts are being made to make it better and provide much-needed help to the customers.