DEMAT Account : Know How It Works (Part 2)

Hello Friends here we come up with an extension of our previous blog “DEMAT ACCOUNT – Know how it really works”

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DEMAT Account : Know How It Works

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In first Blog, we tried to discuss about the importance of Demat account.

In this Blog we would throw some light on aspects like what are the features and benefits of a Demat account!

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Why Demat?

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The demat account in short helps in certain factors as given below:

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- reduces brokerage charges,

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- makes pledging/hypothecation of shares easier,

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- avoids confusion in the ownership title of securities, and

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- provides easy receipt of public issue allotments.

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What are the features and benefits of Demat account ?

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As opposed to the earlier form of dealing in physical certificates with delays in transaction, holding and trading in Demat form has the following benefits:

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1.  It eliminates risks associated with forgery, counterfeiting and loss due to fire, theft or mutilation and reduces brokerage charges,

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2.  Settlement of Securities traded on the exchanges as well as off market transactions,

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3.  Reduces time taken to stock trading drastically avoiding problems encountered in case of physical shares like signature mismatch, postal delays and loss of certificates in transit,

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4.  Enables quick ownership of securities resulting in increased liquidity,

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5.  Easy settlement of the ownership title of securities, and provides easy receipt of public issue allotments,

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6.  Pledging of Securities,

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7.  Auto Credit of Rights / Bonus / Public Issues / Dividend credit through ECS,

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8.  Auto Credit of Public Issue refunds to the bank account,

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9.  No stamp duty on transfer of securities held in Demat form (as against 0.5 per cent payable on physical shares),

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10.  Increased liquidity, as securities can be sold at any time during the trading hours (between 9:55 AM to 3:30 PM on all working days), and payment can be received in a very short period of time,

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11.  It do away the requirements of filling up of transfer deeds,

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12. Change of address, Signature, Dividend Mandate, registration of power of attorney, transmission etc. can be effected across companies held in Demat form by a single instruction to the Depository Participant (DP),

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13.  Holding / Transaction details through Internet/email.

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Next Blog (final part), we would try to know about the Steps for opening a Demat account and Documents Requirement for opening a Demat account.

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Stay Tuned for more on this.

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