DEMAT Account and Trading account plays a key role in establishing a strong relationship between a trader and a broker. In order to do so, a DEMAT Account and a trading account are required so that one can buy, sell or hold securities in the electronic form. Now, once you’ve decided to open a demat account, you are also required to decide what type of DEMAT Account and trading account you want to open as per your requirements. Doing this will ensure that you are trading the securities you want to at the required frequency. But first of all, let’s have a quick view about what a DEMAT Account is.
What is a DEMAT Account?
DEMAT Account is an account which is made to hold your shares and other financial securities in electronic form. The full form of a DEMAT Account is ‘Dematerialised’ account. The main advantage of having a demat account is not only that your securities are secure, but they are also easy to access. To do away with holding the securities in financial form, India introduced the system of DEMAT Account in 1996 for the purpose of trading with NSE. Today, there’s no paperwork required and physical share certificates are no longer issued to anyone. Now, let’s discuss about the types of DEMAT account and the Trading Account.
Types of DEMAT Account:-
There are three types of DEMAT Account: –
1) Regular DEMAT Account
A regular DEMAT Account can be used by any Indian Citizen residing in India. In India, regular DEMAT Account service is provided by two depositories, i.e., NDSL and CDSL through intermediaries, Stock Brokers, Depository Participants. A regular DEMAT Account helps an investor or trader, make operations simpler.
2) Repatriable DEMAT Account
This account is useful for Non-Resident Indians (NRIs) because it allows funds transfer abroad. But, if you want to transfer your funds abroad, you are also required to have an associated Non-Resident External (NRE) bank account. It is an account of an NRI to transfer foreign earnings to India and Indian earnings to foreign countries.
3) Non-Repatriable DEMAT Account
This type of DEMAT Account is also for Non-Resident Indians (NRIs). But, this account is much different from Repatriable DEMAT Account as funds cannot be transferred abroad in a non-repatriable DEMAT Account. Moreover, to use this type of DEMAT Account, you are also required to have an associated Non-Resident Ordinary (NRO) bank account.
Types of Trading Account:-
1) Commodity trading account
A commodity trading account is an account which helps a trader in making investments in commodity market. So, the trading account which helps a trader in buying or selling of commodity products (like gold, crude oil, wheat, sugar, etc.) is done by a commodity trading account.
2) Equity trading account
An equity trading account can be used for trading in stocks, futures, and operations (F&O). However, an equity trading account is not sufficient to subscribe to an Initial Public Offering (IPO) or take delivery of shares. For doing these tasks, you need a DEMAT Account to store them. But, if you want to trade only futures and options, an equity trading account is enough as no delivery of shares and other financial securities is involved in F&O.
There are different types of DEMAT and Trading Account provided in today’s world of trading. You need to undergo a long research and choose the most suitable DEMAT and Trading Accounts as per your requirements, your area of residence, your level of investment, your type of investment.