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How to Transfer Money From Demat Account to Bank Account

Thousands of Indians buy and sell securities in the stock market everyday. To make this process coherent and hassle-free, the National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL) open free demat account for investors to manage and store their securities, shares, bonds, mutual funds and other assets.

Dematerialisation or Demat accounts have considerably bridged the gap between assets lying with an investor and the revenue earned from their sale. Now, it is possible to encash proceeds from the sale of securities, or add money to purchase stocks, at the drop of a hat.

What Are Demat Accounts and How They Work?

Much like a bank account that stores money in an intangible form, a demat account hold certificates for all securities owned by an investor electronically. By digitising these assets, Demat accounts ensure that you trade promptly and smoothly. When starting off, investors register for Demat accounts in tow with trading accounts, which are used for the sale and purchase of securities held in the former.

When you sell a security, the returns show up in the trading account, which in turn is linked to your bank account. In case you want to buy, the stock exchange will look for sellers from whose Demat accounts the requested shares will be debited, and credited to yours. Since exchanges take up to two days to settle transactions, the transfer may reflect in your trading account after a delay.

How to Transfer Money from Demat Account to Bank Account?

1. Log into your trading account which is linked to your Demat account and select the ‘Funds’ section. Alternatively, some interfaces may use ‘Accounts’.

2. Under ‘Funds’, choose whether you want to add funds for buying new stocks or withdraw the amount raised from the sale of existing securities.

3. Under ‘Withdraw’, enter the amount of money you wish to transfer.

4. Enter your bank account details, following which you must type in your trading password to initiate the transfer. The money will be credited to your bank account.

However, before delving into the procedure of how to transfer money from your Demat account to bank account, you must bear below 4 points in mind:

1. Funds cannot be transferred from your Demat account to your bank account directly. All transfers to your bank account can be made using the trading account, which acts as an interface between your Demat account and bank.

2. Remember that only the amount earned upon the sale of securities can be encashed.

3. Do not confuse your fund limit with the amount of money you are authorised to transfer. Brokerages allow for trading leverage by lending you a certain amount of funds, depending on your existing securities. This amount will be displayed on your account, but it is not the amount that you can transfer.

4. Brokers accept all major methods of payment, including online transfers using mobile phones and laptops. The process of making such transfers is also largely similar across brokerages.