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Why is holding a Demat Account is as important as a Savings Bank Account

05 Jan 2023

According to the data published by NSDL and CDSL together, a total of 5.77 Crore Indians at present have opened their Demat account to participate in the Indian Stock Market. Ten years back, in FY 10-11, there were a total of 19 million Demat account registered in India. This number grew to more than 51 million in FY 20-21. While Indians have started participating in the growing  Stock Markets, there still exists a notion of uncertainty in the minds of Indians. Discussing this notion, let’s talk about why it is necessary for every Indian to hold a Demat account.

Approximately 80% of the Indian population holds a Bank Account in some or the other form. The essentiality of holding a bank account comes from the requirement of borrowings, savings, deposits, and other financial requirements such as insurance claims, PFs, etc. Of this 80% population, there is no given record of what percent of people are actively using their bank accounts. While there is widespread knowledge available describing the benefits of holding a Bank account, not much content is available on the DEMAT front. Most individuals think that a Demat account is only used for trading purposes, but there are hidden features that no one talks about.

A Demat account is a type of account that acts as a safekeeper for your purchased shares, bonds, debentures, mutual funds, ETFs, NFOs, etc. Without a Demat account, an individual cannot invest in any financial activity that takes place in the Indian Stock Market. Company Shares are one of the most transacted assets of a Demat account. Buying and selling of shares can be done only when you hold a Demat account with your Bank, Broker or any other financial institution.

Prior to the introduction of DEMAT, shares and other financial records were transacted in physical form in a way of receipts. This resulted in a messy environment in the Indian Stock Market as there was no real-time regulated transaction. To clear this mess, the guardian of the Indian Stock Market - the Securities and Exchange Board of India (SEBI), made it compulsory for all traders and investors to have a Demat account. Electronically processed, the Demat account within seconds not only reflects the transaction but also helps the regulators to keep a record of the same. Monitoring price movements, getting daily updates, or exploring a wide range of investment options is all possible at one-click. 

Shares purchased can also be used to pledge loans from the banks or pledged to get additional leverage to trade with your broker. Moreover, a Demat account provides you with an alternative for savings, diversifying your investment choices, adding more to your Net-worth. Dividend payouts, bonuses, and other gains are directly reflected into your Demat account without any paper filling fuss. What comes as the cherry on the top is that you can open your free Demat account in less than 5 minutes!

Motilal Oswal, in its journey spanning over 3 decades, has always tried to bring in sync the blend of technological power and expert minds to build a product that will serve its customers to the fullest. With over 15 lakh happy clients, Motilal Oswal, today, is listed among the top financial brokers in India. Claim your account with Motilal Oswal and become a part of this huge family of investors and traders!

Open a Demat account today with Motilal Oswal!

Related Articles:  Why is a Demat Account a must for 21st Century Investor | Evolution of Demat and Trading Account in India | Factors to Consider When Opening a Demat Account | Eligibility Criteria to Open Demat Account in India | Types Of Demat Account & Trading Account

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