How secure are stocks in an online demat account | Motilal Oswal
How secure are stocks in an online demat account | Motilal Oswal

How secure are stocks in an online demat account

What is a Demat account? Is it safe to open a Demat account? If so, then which Demat account is actually safe? These are just some of the questions that a new investor can have. So let us try to find the answers to these questions.

  • What is a Demat account ?

The act of transferring and storing physical shares into electronic form, known as dematerialization, has revolutionised the way assets are traded and exchanged in today's stock market. A Demat account is used to store securities in the same way that a bank account is used to store money. The major goal of Demat accounts is to reduce the danger of having actual stock certificates while also making transactions and settlements easier. 

Shares are purchased and stored in a Demat Account while trading online, making it easier for consumers to trade. All of an individual's interests in shares, bonds, securities issued by the government , and mutual funds are held in a Demat Account.

  • Is it safe to open a Demat account? Which Demat accounts are safe?

Any investor can open a Demat account with specific  companies called Depository participants or DPs. All DPs are linked to one of two depositories, the National Securities Depository Limited (NSDL) or the Central Depository Services Limited (CSDL), all of which are guaranteed by the NSE and the BSE, respectively. Both the NSE and the BSE are well-known institutions, with the added benefit of having been endorsed by a number of government agencies and major corporations. In addition to this, the Securities Exchange Board of India (SEBI) regulates the securities stored in both depository locations. Due to the standardisation of PoA (Power of Attorney) requirements under SEBI regulations, the chances of a scam occurring are extremely minimal. 

It should be noted that although signing a PoA is not required, it does make transactions easier. Brokers cannot conduct transactions or transfer securities for off-market trades without the client's written approval, according to the new regulations. Furthermore, because of the electronic structure of deals and payments, authorities have a trail to follow. Regulatory authorities may now track any fraudulent behaviour by brokers. 

All this makes opening any online Demat account a safe option. Obviously, steps like keeping your login credentials confidential and regularly updating your registered phone number and email be taken by investors to keep their accounts more secure. 

Related Articles: How to Open a Demat Account Without a Broker | Factors to Keep in Mind While Opening a Demat account | Factors to Consider When Opening a Demat Account | 10 Points to Remember When Operating your Demat Account | Types Of Demat Account & Trading Account

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