Demat, short for “dematerialization”, refers to the process of converting physical securities such as shares, bonds, and debentures into electronic form. Dematerialization is carried out by a depository, which is a financial institution that holds securities in electronic form. The depository is responsible for maintaining the electronic records of ownership and transfer of securities, and for facilitating the settlement of trades.
Investors can open a Demat account with depositories through a Depository Participant (DP), which is typically a bank or a brokerage firm.
The benefits of Demat accounts include lower transaction costs, faster settlement of trades, and a reduction in the risk of loss or theft of physical securities. Demat accounts also provide investors with easy access to their holdings and the ability to trade electronically, which has made investing more convenient and accessible to a wider range of people.
