Wednesday, January 14, 2009

What is a Demat account?

Today, every person who buy or sell stocks knows the importance of a demat account. Demat account has become integral part of stock market investment. Today, it is almost necessary to have a demat account for investing in stock market. In simple terms, we can term demat account as an account with particular bank or financial institution (also known as depository participant or DP) which stores our stocks in electronic format, otherwise demat account refers to dematerialised account which dematerializes use of paper based stocks.

The major reasons behind the introduction of demat account was to decrease number of paper based stock frauds and easing allocation of stocks. Introduction of demat account has really served its purpose and made it very easy for people to manage their stocks. Most of banks in India are offering demat account for very nominal fee and people can easily open a demat account with any of these banks as they open their bank accounts.

From 2007 onwards, it has become necessary for all demat account holders to have Permanent Account Number (PAN). Therefore, people who are looking for new demat account are required to get PAN first. People can easily apply for PAN card through large numbers of UTI offices across India.

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