Storing securities has now become easier than ever, thanks to Demat accounts. People can now hold their securities online in Demat accounts, avoiding the need to hold the documents in the physical form. Using a Demat account along with a trading account further allows for convenient transactions of these securities.


Using a Demat account has become much easier than ever due its convenience. You can get started with one after registering with your preferred brokerage firm. Learn more about how to use a Demat account and other related aspects below.

Using a Demat account

Using a Demat account involves several key steps:

  • Open an Account

Choose a depository participant (DP) and open a Demat account. You'll need to provide the necessary documents and complete the Know Your Customer (KYC) process.

  • Link the Demat Account to a Trading Account

To buy and sell stocks, link your Demat account with a trading account. This allows you to execute transactions in the stock market.

  • Depository Account Number (DP ID)

Once your Demat account is set up, you'll receive a unique DP ID. This ID helps you identify your Demat account with the depository.

  • Dematerialization

When you buy shares, they are credited to your Demat account in electronic form. This process is called dematerialization, and it eliminates the need for physical share certificates.

  • Rematerialization

Suppose you wish to convert electronic shares back to physical certificates (though this is rare). In this case, you can do so through rematerialization.

  • Buy and Sell Stocks

Using your linked trading account, you can place buy and sell orders for stocks. When you purchase shares, they are automatically credited to your Demat account.

  • Monitor Holdings

Regularly check your Demat account to keep track of your holdings, stock portfolio, and transaction history.

  • Dividend and Bonus Shares

Any dividends or bonus shares you receive are also credited to your Demat account.

  • Transfer Shares

You can transfer shares from your Demat account to another account if needed, typically through a Delivery Instruction Slip (DIS).

  • Safekeeping

Your Demat account provides a safe and secure way to hold and manage your investments, eliminating the risks associated with physical share certificates.

  • Nomination

You can nominate a person to inherit your Demat account holdings in the event of your demise.

  • Statements

Periodically, you'll receive statements showing the holdings in your Demat account. It's essential to review these statements for accuracy.

How to Operate Demat Accounts

1. Trading Account and Demat Account

You can use a Demat account to trade and purchase shares via the share allocation option. After linking your Demat account with a trading account, you can allocate shares and view all Demat holdings. This process can be done once and then again after each new purchase. However, the frequency and duration of allocations depend on the kind of shares purchased.

2. Bank Account and Demat Account

All funds debited and credited during transactions are from your bank account. It is mandatory to link this to your Demat and trading accounts for successful transactions and to maintain records. All transactions made are usually reflected in the bank account almost immediately.

Importance of Demat Accounts

Here are some of the reasons why operating a Demat account online can be useful for you:

1. Security in Dealings

The main benefit of utilising a Demat account is its security in dealings. These are maintained by the two central depositories of the country, namely Central Depository Services Limited and National Securities Depository Limited. Since securities are stored in an online medium, all risks associated with physical documents are minimised.

2. Time-saving 

Demat accounts have increased convenience since these can be operated directly from people’s homes. Furthermore, all amounts debited or credited get reflected in an account instantly and bank statements are automatically sent to investors. 

3. Storage of Various Investments

You can hold multiple investments in a single Demat account, including equity shares, mutual funds, exchange-traded funds, bonds, and more. The interest, dividends or refunds received from these can also quickly reach these accounts without delays.

Remember that a Demat account primarily deals with equity shares, mutual funds, bonds, and other securities. Following proper procedures and staying informed about market changes is crucial when using your Demat account for investment purposes.

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FAQs on How to use Demat Account

Can I store funds in a Demat account?

No, a Demat account’s primary function is to store all your shares and securities in a dematerialised format. There is no component for any cash transactions in it.

Will I be able to purchase securities without operating a Demat account?

No, it is not possible to trade in securities without operating a Demat account.

What is a Depository Participant?

A Depository Participant (DP) is considered an agent of either CSDL or NSDL and provides depository services to investors. As per SEBI’s guidelines, entities such as banks, stockbrokers, custodians, etc., can be affiliated as DPs.

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