A Demat account, short for “Dematerialized Account,” is an electronic account. It holds an investor’s securities, such as stocks, bonds, and mutual funds, in digital form. It eliminates the need for physical share certificates, thus making the buying, selling, and transferring securities quicker and more efficient.
In India, various demat accounts cater to different investor needs, from beginners to seasoned investors. Choosing the right type of demat account is essential to ensure smooth trading and meet personal financial goals. Below, we’ll explore the various types of demat accounts in India.
Types of Demat Accounts
Whether you are an individual investor, a non-resident Indian (NRI), or someone looking to trade in foreign markets, there’s a suitable option. Let’s explore the most common types of Demat accounts:
Regular Demat Account
This is the most widely used account in India for holding securities. It is mainly used for buying and selling shares, bonds, and other securities in India. The account is linked to your trading account, and you can easily transfer securities between the two accounts if you are involved in stock market transactions. Depository Participants, like banks or financial institutions, usually provide a regular Demat account. It allows one to trade in the Indian stock market.
Basic Service Demat Account
BSDA refers to the Basic Service Demat Account, which small investors can open with low trading volumes. It has all the features of a normal Demat account but at a more affordable price. BSDA accounts exist only for individuals who meet specific criteria, such as the value of securities held and the limit of transactions. This account allows investors to hold and manage securities without heavy annual maintenance charges. Therefore, it is recommended for infrequent traders or novices.
Repatriable Demat Account
A Repatriable Demat Account is specifically designed for Non-Resident Indians (NRIs) who wish to invest in Indian securities with the facility to repatriate the capital, including any gains made, to their overseas bank account. This account will have the facility to repatriate both the principal and any gains that may be made on an investment. To open such an account, NRIs must link it to a Non-Resident External (NRE) bank account. This account is suitable for NRIs who want the flexibility of transferring their earnings to their country of residence.
Non-Repatriable Demat Account
NRIs can also open a non-repatriable demat account. In this kind of account, the invested amount is freely available for withdrawal or transfer in India but cannot be transferred abroad to the investor’s home country. A non-repatriable demat account is linked to the account of a Non-Resident Ordinary (NRO). NRIs typically use it if they want to invest in an Indian market but do not prefer shifting the money outside India.
How to Choose the Right Type of Demat Account
When choosing a Demat account, always consider the following factors-
- Trading Frequency: A regular Demat account with fewer restrictions might be more suitable if you trade frequently. BSDA seems to be a better option for less frequent or tiny investors as the maintenance cost is significantly lower.
- Repatriation Needs: NRIs must assess whether they intend to repatriate the proceeds from their investments. If funds have to be repatriated, a repatriable demat account will suffice. People wanting to keep their money within India may like the Non-Repatriable one.
- Charges and Fees: Different Demat accounts have varying fee structures, such as annual maintenance charges and transaction fees. So, comparing the charges for one type of account with another is always important before choosing.
- Other Services: DPs often provide value-added services, such as research reports, advisory, and margin trading. Determine whether you need these services, as this may help you decide.
Conclusion
A Demat account is compulsory to apply for initial public offerings and trade equity shares. Choosing the best Demat accounts is necessary to opt for credible stockbrokers. Open an IIFL Capital Services Limited Demat and Trading account to get access to quality research and tools. With us, you do not have to pay Demat account opening or maintenance charges for a year.
