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Why Every Indian Must Have a Demat Account Along With a Bank Account

19 Jun 2023

You rarely (or never) see anyone holding paper share certificates anymore. Furthermore, you don’t have to physically travel to the head office of a large corporation to buy the stocks of that company. Besides stocks, you may want to invest in debentures or any other security, and you can hold all these in a format that is more reliable and efficient than paper. The dematerialisation of securities took place a while back, and since then, has transformed the scenario of the investing marketplace. Stocks and other securities are now no longer in paper form, but electronic form. They are held in what is called a Demat account. If the very thought of how to open a Demat account is stopping you from having one, be rest assured that this is the best thing you can do if you wish to invest in stocks, debentures or any other securities. Furthermore, for your investments and trading to be seamless, your Demat account should be linked to a bank account. 

Advanced Demat Account

Thanks, in a large part, to the digital age, everything is shifting radically from paper to a display. Hence, why shouldn’t securities move in the same direction? The best Demat account is the one that keeps your stocks secure and holds them for as long as you want. Typically, you can open a Demat account with any good brokerage like Motilal Oswal, or a bank. Normally, opening a Demat account linked to a bank account is a free service that a depository participant (DP) gives you. A depository participant has the authorization to open a Demat account and hold shares on your behalf. In 1996, the Securities and Exchange Board of India (SEBI) made it mandatory to own a Demat account if you want to invest your wealth in securities in the stock market. To make the purchase and sale of stocks easy, a Demat account is ideally connected to a bank account. 

Connected Accounts

Operating a Demat account in India is a wholly online process. Furthermore, operating and managing a bank account is also done smoothly online nowadays. Now when you open a Demat account, it stands to reason that you are a potential trader/investor and wish to engage in the purchase and sale of stocks and shares. For this, you require a trading account, so that the unhindered transactions of trading can take place too. This trading account could be linked to your Demat account and bank account. Here is what each of these accounts do, and this will give you a cluse why you need them all to work in tandem:

  • A trading account lets you place orders to buy and sell stocks.
  • A bank account that is connected to your Demat and trading accounts helps you to purchase shares (with money from your bank account). Also, when you want to sell shares held in your Demat account, the money gets deposited directly into your connected bank account. 
  • A Demat account holds your shares which are bought via the money in your bank account. In turn, shares sold from your Demat account yield profits that go into your bank account. 

Secure Accounts

Now that you know how to open a Demat account, and you can do this at any reputed brokerage like Motilal Oswal, there’s nothing stopping you from doing this and linking your bank account to it. You can open a Demat account without any security concerns and connect it online to your bank account. At Motilal Oswal this is simple and you get guaranteed security. 

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 | Upcoming IPO | LIC IPO

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