In India, Shares And Securities Are Held Electronically In A Dematerialized (Or "Demat") Account, Instead Of the Investor Taking Physical Possession of Certificates. A Dematerialized Account Is Opened By The Investor While Registering With An Investment Broker (Or Sub-Broker). The Dematerialized Account Number Is Quoted For All Transactions To Enable Electronic Settlements Of Trades To Take Place. Every Shareholder Will Have A Dematerialized Account For The Purpose Of Transacting Shares.

Access To The Dematerialized Account Requires An Internet Password And A Transaction Password. Transfers Or Purchases Of Securities Can Then Be Initiated. Purchases And Sales Of Securities On The Dematerialized Account Are Automatically Made Once Transactions Are Confirmed And Completed.

Advantages Of Demat
  • Reduced Transaction Cost
  • Immediate Transfer of Securities
  • No Stamp Duty on Transfer of Securities
  • Easy and Convenient Way To Hold Securities
  • Reduced Paperwork for Transfer Of Securities
  • No "Odd Lot" Problem: Even One Share Can Be Sold
  • A Demat Account Also Helps Avoid Problems Typically Associated
  • There Is No Risk Due To Loss On Account Of Fire, Theft Or Mutilation.
  • Transaction Costs Are Usually Lower Than That In The Physical Segment.
  • Safer Than Paper-Shares (Earlier Risks Associated With Physical Certificates Such As Bad Delivery, Fake Securities, Delays, Thefts Etc. Are Mostly Eliminated)
  • Change In Address Recorded With A DP Gets Registered With All Companies In Which Investor Holds Securities Eliminating The Need To Correspond With Each Of Them Separately.
  • Transmission Of Securities Is Done By DP, Eliminating The Need For Notifying Companies.
  • Automatic Credit Into Demat Account For Shares Arising Out Of Bonus/Split, Consolidation/Merger, Etc.
  • A Single Demat Account Can Hold Investments In Both Equity And Debt Instruments.
  • The Bonus/Right Shares Allotted To The Investor Will Be Immediately Credited Into His Account.

With Physical Share Certificates. For Example: Delivery Failures Caused By Signature Mismatch, Postal Delays And Loss Of Certificate During Transit. Further, It Eliminates The Risks Associated With Forgery And Due To Damaged Stock Certificates. Demat Account Holders Also Avoid Stamp Duty (As Against 0.5 Per Cent Payable On Physical Shares) And Filling Up Of Transfer Deeds. The Biggest Advantage Of Having Demat Account Is That You Don't Have To Pay For Stamp Since These Are Electronically Stored Which Reduces The Transaction Cost.

Goal Of Demat System

India Adopted The Demat System For Electronic Storing, Wherein Shares And Securities Are Represented And Maintained Electronically, Thus Eliminating The Troubles Associated With Paper Shares. After The Introduction Of The Depository System By The Depository Act Of 1996, The Process For Sales, Purchases And Transfers Of Shares Became Significantly Easier And Most Of The Risks Associated With Paper Certificates Were Mitigated.