Tuesday 20 November 2018

Demat Services that Make Investing Easier

Demat Services that Make Investing Easier
Demat account opening is essential for an investor who is planning to buy and sell securities or other investments in the financial markets. Dematerialization is the process of changing physical security investments into electronic format.
A Demat account works like a bank account, in which a person can deposit or withdraw money, and the corresponding transactions are made in a bank passbook. Similarly, investment securities are held in electronic form in a Demat account and are credited or debited accordingly.
A demat account can be started with a depository participant (DP), which is an agent of the depositories. There are mainly two depositories in India; National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) which are both registered with the Securities and Exchange Board of India (SEBI)
An investor can open a demat account with no balance of shares and can maintain a zero balance in their account. Let’s have a look at the top demat services provided by a DP that can make investing easier for you!

Demat Account Opening

For demat account opening, an investor needs to approach a DP and fill out the account opening form along with required documents (proof of address, proof of residence, etc) and passport-size photographs. It is also important to carry the original documents for verification.
The DP will check the details presented and contact you for in-person verification. Once your application is processed, the DP will give out an account number and client ID which you can use to access your demat account online.

Dematerialization Of Existing Mutual Funds And Securities

You can dematerialize the existing mutual fund units and securities that you have with the help of the demat services provided by a DP. By doing so, your financial instruments will automatically reflect in the same demat account that you’ve opened.

Rematerialisation Of Mutual Funds And Securities

Rematerialization is the process through which an investor can get his electronic holdings converted into physical certificates. The investor needs to submit the rematerialisation request to their DP with whom he has a demat account. The DP initiates the request in the system and blocks the investor’s securities automatically.
The DP then issues the request to NSDL and forwards the request form to the R&T (registrar and transfer) agent/issuer. This way, the document is dispatched and later the investor's blocked balances are debited from the demat account.

Transfer Of Mutual Funds And Securities

An investor can transfer his/her mutual funds or securities with the help of switching. It is a process of transferring investments within various financial markets. With this demat service, an investor can switch from one investment to another, liquidate a security in exchange for other securities or transfer brokerage assets.

Pledging Of Securities

If an investor wants to take a loan against their securities that are held in their demat accounts, then the securities are offered as a deposit to the lender by the investor. This process is identified as pledging.
The investor can wish to loan a higher amount at a better valuation as there is little to no risk involved in contesting the ownership of their securities. Moreover, the time and documentation process needed to process such loans is also less.
To pledge dematerialized investments, both the lender and the investor must have a demat account with the same depository (NSDL or CDSL), but it is not mandatory to have an account with the same DP. The investor receives the profits generated from the pledged securities and will receive all the benefits during the duration of the pledge.

Freezing Or Un-freezing A Demat Account

A demat account holder can choose to freeze securities in their demat account to help limit unexpected debit credits or both. An investor can also freeze a certain quantity of a particular security in the Demat account.
As a result, an investor can reserve some amount of securities as "not for trade," without disrupting the flow of other securities in the demat account. The investor can freeze the account by providing an instruction to their DP with a freeze/unfreeze form which is available with the DP.

Account Closure

Demat accounts incur maintenance charges and annual fees, even when you don’t use them for trade. Thus, it is always a good idea to close all your zero balance or inactive demat accounts.
If you have demat accounts with active balances, then they can all be combined into one demat account and the other redundant demat accounts can be closed. You can close a demat account by submitting the required form and documents to your DP.
Trading has come a long way since the inception of dematerialization. Back in the 90s, the brokers had to yell the prices of a stock for trading and then work endlessly on filling the physical certificates. However, Demat services have helped investors to efficiently trade with a more streamlined process!

In conclusion, demat services have revolutionized the way investors manage their securities and investments in the financial markets. From dematerialization to rematerialization, transferring securities, pledging assets, and even freezing or closing accounts, demat services offer a plethora of options to investors, making investing easier and more convenient.

Opening a demat account is the first step towards entering the world of electronic trading, allowing investors to seamlessly buy and sell securities with the click of a button. The process of dematerialization enables investors to convert their physical securities into electronic format, streamlining the management and tracking of their investment portfolio.
Moreover, Demat services such as transferring securities, pledging assets, and freezing or unfreezing accounts provide investors with greater flexibility and control over their investments. Whether it's switching between investments, taking loans against securities, or safeguarding investments from unexpected transactions, demat services empower investors to make informed decisions and optimize their investment strategies.
Furthermore, the convenience of account closure allows investors to consolidate their holdings and streamline their investment accounts, reducing maintenance charges and simplifying portfolio management.
Overall, Demat services have significantly simplified the investment process, allowing investors to trade efficiently and effectively in today's dynamic financial markets. With the evolution of dematerialization, investors can now trade with ease, benefiting from a more streamlined and digitized trading experience.

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