What is a Demat account?
Demat is short for ‘dematerialized.’ Dematerialized means that the securities held in a Demat account are electronic in nature.
Here are the various types of Demat accounts that have made trading the easy and accessible process it is today.
Types of Demat account
Fundamentally, there are three different types of Demat accounts available to traders. Both Indian residents and non-residential Indians have access to trading via specific Demat accounts mentioned below.
Your market participation will be a lot more meaningful when you select the right demat account for yourself. These are as follows:
- Regular Demat account:
This is a Demat account that is recommended to any traders who reside within India. This is the most common Demat account as it is ideal for most individuals who tend to trade in equity shares alone.
If you plan to trade in futures and options, then there isn’t a need to hold a regular Demat account. Futures and options come with a date of expiry and need not be stored in one’s Demat account for the long term.
- Basic Services Demat Account
A Basic Services Demat Account is similar to a regular Demat account, the only difference is that there aren’t any maintenance charges if holdings are within this account are < ₹50K. If holds greater than ₹5oK and less than ₹200K in their BSDA account, a maintenance charge of ₹100 per annum is applied.
- Repatriable Demat account:
A Demat account used by NRIs under which funds can be transferred abroad. This type of Demat account requires an NRE bank account associated with it.
Non-resident Indians can trade in Indian securities through a repatriable Demat account. It allows traders to transfer funds abroad. Once you become a non-resident India, you need to close the Demat account that you owned as a residential Indian. Once your account is closed, you can transfer shares to a specific Demat account known as a non-resident ordinary Demat (NRO) account.
- Non-Repatriable Demat account
There is a second type of Demat account which is recommended for non-resident Indians. A Demat account used by NRIs under which funds cannot be transferred abroad. This type of Demat account requires an NRO bank account associated with it.
In this type of Demat account online, one’s funds and wealth cannot be transferred across nationalities.
For the newcomers, it is ideal to start with a basic Demat account. Once we start investing our account will automatically convert into the normal account. If you are NRI, it is always advisable to start the Repatriable Demat account instead of the normal Demat account.