Demat Account

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Chances are you have not seen a ‘share certificate’. Why? Because most investors today have their holdings in ‘demat’ or electronic form. Now, to many the term ‘demat’ may seem to be a distant something – dabbled in by stock-exchange patrons. Far from it, though. This report will tell you the why, the what, and the how of the demat system, in the process explaining what it means to invest in the stock market.

Demat is a simple abbreviation for dematerialized – this implies ‘in electronic format’ as against ‘in physical format’—or materialized. What exactly does it mean?

To begin with, this is another of the technology-spawned marvels that cuts through the clutter and helps streamline processes and systems. Before dematerialization, the stock exchanges were a cacophony of sounds, with traders standing on the floor and shouting out prices of stocks for buying or selling. Then, money would be exchanged for physical receipts of the shares, in the form of certificates. This led to a great deal of paperwork. Even the settlements of trade agreements took time because of the need to deliver the share certificates.

With the opening of a large number of stock exchanges, and a large number of companies listing their shares at these exchanges, there was much demand for buying up stock, thereby causing an