How to Transfer Money from Demat Account to Bank

In India’s modern securities market, demat accounts have made investing more convenient by storing financial instruments electronically. However, many investors—especially new ones—find the process of withdrawing or transferring money from these accounts to their bank account confusing.

A demat account holds your securities in electronic form, but does not hold cash funds. Any cash movement occurs through your trading account, which acts as an intermediary between your demat account and your bank account. It only holds securities such as shares, mutual funds, bonds, and ETFs. Any monetary transactions—such as adding or withdrawing funds—occur through a trading account, which is linked to the demat account and your bank account. Understanding this ecosystem is essential for investors managing their money independently.

If you’re new to investing, it’s important to first open demat account with a trusted broker before initiating any transactions.

This article explains the end-to-end process of transferring money post-sale of securities, expected timelines, methods, involved entities, and FAQs—clearing the common doubts faced by retail investors.

In India’s securities infrastructure, three types of accounts work in coordination to facilitate smooth trading and investment — the Demat Account, Trading Account, and Bank Account.

1. Demat Account

• A Dematerialised (Demat) Account holds financial instruments in electronic form, replacing physical share certificates.
  

• Securities such as shares, bonds, mutual funds, ETFs, and sovereign bonds are stored in this account.
  

• It is regulated by SEBI and maintained through depositories such as:
  

  • NSDL (National Securities Depository Limited)
    

  • CDSL (Central Depository Services Limited)

2. Trading Account

• The trading account acts as a bridge between the Demat Account and the stock exchange.
  

• It enables the buying and selling of securities on exchanges like NSE or BSE.
  

• When securities are sold, the proceeds first move to the trading account before being transferred to the bank account.

3. Bank Account

• The linked bank account is where all funds related to trading activities are finally credited or debited.
  

• Withdrawals can only be made to the bank account connected to the trading account for security and compliance purposes.

Note: You cannot transfer funds directly from a Demat account to your bank account. The flow of transactions always follows this sequence: Demat → Trading Account → Bank Account.

Understanding the transaction and settlement timeline helps you know when funds become available after selling your shares.

Transaction and Settlement Process

Once you sell securities through your broker’s platform:

• The transaction is executed on the T day (Trade Day).

• For most equity trades, the exchange settles the transaction on T+1 (one business day later), as per SEBI’s rolling settlement framework.

• On T+1, the sale proceeds are credited to the broker’s clearing account and then reflected in your trading account ledger once the broker processes the payout.

• After the broker credits your trading account balance, you can withdraw the amount to your linked bank account.

Formula (Settlement Timeline):
Sale Date = T
Trading Account Credit = T + 1 business day (approximate)
Eligible for Withdrawal = After T+1 and broker fund processing

SEBI has also introduced an optional T+0 settlement mechanism for select securities, where trade and settlement occur on the same day

Most brokers offer a digital and seamless process to transfer funds, though the exact steps may vary slightly depending on the platform.

Step-by-Step Process:

1. Login

• Access your broker’s trading portal or mobile app using your credentials.
  

2. Go to Funds Section

• Navigate to the tab labelled “Funds,” “Accounts,” or “Wallet.”
  

3. Choose Withdraw/Transfer Option

• Select the “Withdraw Funds” or “Transfer to Bank Account” option.
  

4. Enter Amount

• Input the specific amount you wish to transfer, ensuring it is within your available balance.
  

5. Select Bank Account

• Choose the linked bank account registered with your trading profile.
  

6. Confirm & Authenticate

• Authorise the transaction using OTP, password, or any other required security verification.
  

7. Receive Confirmation

• A confirmation message or email is typically sent by the broker once the transfer is processed successfully.

Brokers support various modes for transferring money to your bank account:

NEFT/RTGS

• Works in batch mode

• Usually reflects within 2 to 24 hours on working days

IMPS

• Immediate Payment Service

• Useful for instant transfers, including holidays

UPI

• Unified Payments Interface

• Instant, convenient, subject to UPI limits

Internal Smart Transfers

• Some brokers allow same-day internal transfers through the broker’s platform

Before placing a withdrawal request, ensure the following:

• The trade is fully settled (T+2)

• The fund is not part of collateral amount pledged for margins

• No pending intraday or open trade is affecting your available balance

• The bank account is KYC verified and active

• The withdrawal request is placed within the broker’s cut-off time

Several parties work together to ensure smooth trading, settlement, and fund transfers:

Depositories

• NSDL & CDSL: Maintain electronic security records

Brokers

• Provide the platform for trading and withdrawal

• Offer tools for viewing settlement status, available balance

Banks

• Destination for fund credit

• Act as intermediary for IMPS/NEFT/RTGS

SEBI

• Regulates broker conduct and investor protection

Protecting your investments and personal information requires the following key security processes and understanding regulatory safeguards:

• Enable 2-factor authentication on all trading portals

• Avoid using public Wi-Fi to place fund transfer requests

• Regularly check trading ledger and contract notes

• SEBI mandates brokers to separate client and operational accounts, ensuring funds safety

Following these key considerations can help facilitate timely fund transfers between your trading and bank accounts:

1. Wait for Trade Settlement

• Avoid making withdrawals before your trades are fully settled, as unsettled amounts may not yet be available for transfer.

2. Place Requests Early

• Submit withdrawal requests early in the day to meet same-day processing cut-offs and prevent delays.

3. Use Only Verified Bank Accounts

• Ensure that the linked bank account is verified and matches your trading account details to avoid transfer rejections.

4. Keep Details Updated

• Regularly update your contact information and bank details in your trading profile for timely and secure transactions.

5. Check for Pending Pledges or Bonus Shares

• Review your account for any pledged securities or corporate actions (such as bonus shares), as these may temporarily affect your available balance.

Understanding how to withdraw money from your demat and trading account is essential for any retail investor managing personal finances. By tracking your trades, adhering to T+2 settlement cycles, and using secure transfer methods, you can access your funds without confusion or delay. This knowledge is particularly important for self-directed investors building a diversified financial portfolio using stock market tools.

This content is for informational purposes only and the same should not be construed as investment advice. Bajaj Finserv Direct Limited shall not be liable or responsible for any investment decision that you may take based on this content.