Demat accounts are very popular in India. Demat account is the short form of Dematerialised Account. In fact according to SEBI, Demat accounts are now compulsory.
Previously during the time of Harshad Mehta (1992), the shares were trading in physical forms. And this was the reason why some fraudsters were taking the advantage of this opportunity to print fake shares and selling it to public. But after Harshad Mehta Scam, SEBI has decided to transact shares only in Dematerialised form (Electronic form) so that every transaction can be monitored and these types of scams can be avoided.
Is Demat account a Must?
Yes, according to SEBI, Demat accounts are now Must in India. Every Investor Must have a Demat account to transact in the Securities. However, according to SEBI, it has allowed trades up to 500 shares to be settled in physical form. But still nobody prefers Physical shares anymore in India. Everybody is preferring Demat accounts Now a days………!!!!!!!!
Advantages of Demat Account -
- A safe and convenient way to hold securities;
- Immediate transfer of securities;
- No stamp duty on transfer of securities;
- Elimination of risks associated with physical certificates such as bad delivery, fake securities, delays, thefts etc.;
- Reduction in paperwork involved in transfer of securities;
- Reduction in transaction cost;
- No odd lot problem, even one share can be sold;
- Nomination facility;
- Change in address recorded with DP gets registered with all companies in which investor holds securities electronically eliminating the need to correspond with each of them separately;
- Transmission of securities is done by DP eliminating correspondence with companies;
- Automatic credit into demat account of shares, arising out of bonus/split/consolidation/merger etc.
- Holding investments in equity and debt instruments in a single account.
Disadvantages of Demat account -
There is no as such disadvantage of Demat account. And even if there is any disadvantage of Demat account than by law, In India we Must have to use Demat accounts to do share transactions.