Before Demat accounts first came to India in the year 1996, when digitization was not introduced to the world, physical copies of shares were issued, and trades occurred in their physical form. Before this, when digitization was not introduced to the world, physical copies of shares were issued, and traded in their physical form. During this time, traders had a lot of hassle when it came to keeping their shares safe from robbery, theft and damage. This is where the need for Demat accounts first arose. Today, the core benefits of Demat accounts is that there is no more of this labour associated with trading. Here are benefits of Demat accounts.
1. Lowered Risk:
When securities were completely physical, there was massive risk of damage, robbery, theft and other such threats. When trades become digitised, so did storing one’s traded. Dematerialised securities offer safer trades as securities can no longer be forged or stolen as they are now electronic in format. Bad deliveries are also no longer an issue as electronic copies are generated artificially without any scope of manual error.
2. Cost Effective
One of the benefits of Demat accounts is how cost effective they are. Since zero physical securities are involved in the process of trading, there is no need to add duty and stamp charges to every individual trade. Additionally, there is no reason for handling charges. These lowered costs reduce the overall cost made by the investor, making one’s Demat account a lot more cost effective.
3. Hassle Free Process
Combined with online trading as well as internet banking, a Demat account is incredibly convenient to use. The entire process is a lot more seamless and hassle free. Transactions are a lot more efficient and quick. Once shares are purchased in one’s trading account one’s bank account is automatically debited. Your Demat account is automatically credited without any manual involvement. The same applied to selling the shares in your trading account.
4. Speedy Transfer
Before there was a need for demat account online, shares were sent to the registrar in order to get them transferred in one’s name. This process was not only time consuming but could end up taking months at a time. One of the benefits of demat accounts online is that shares are transferred immediately without any lag. You are also no longer required to pay stamp duty. Additionally, not paying for stamp duty as well as transferral of securities makes this process cost effective and fast.
5. No Odd Lott Problem
Before the need for Demat accounts was established, trading used to be without odd lots. Traders typically could not sell or buy odd lots to their name. They had to sell or buy a specific quantity which would become a huge hassle for them in the form of securing physical certificates. A meat account addressed this issue by giving traders the opportunity to both sell or buy every single share available on the stock market. This not only brings in more people to the world of trading, but it also increases the frequency of trades carried out on the market by individual traders.