A demat account holds securities in electronic form. Before dematerialisation, ownership was represented by physical certificates that could be lost, forged or damaged. Today, holdings sit in an account with a depository, and transfers are book entries.
Depositories and depository participants
India has two depositories - NSDL and CDSL. You do not open an account with them directly; you open it through a depository participant (DP), which is the intermediary that services your account. Your securities are recorded at the depository, in your name.
What can be held in a demat account
- Equity shares
- Bonds and government securities
- Exchange-traded funds
- Mutual fund units, where you choose the demat option
What to check before opening one
- The charges - account opening, annual maintenance, and per-transaction debit charges.
- Whether the account is opened with a power of attorney or uses a DDPI, and exactly what it authorises.
- The nomination - adding a nominee at the outset avoids considerable difficulty later.
- Whether the platform gives you the statements and holding reports you will actually want.
Educational content. This article explains general concepts. It is not investment advice, does not recommend any security or scheme, and takes no account of your personal circumstances. Investments in securities are subject to market risks.