A Demat Account is an account where you can hold your securities in electronic format. A Demat Account is mandatory if you want to store, view and manage your shareholdings. A few decades ago, many people used to think that investing in the stock market is equal to gambling. People believe that the stock market is a money pit, but, as people become aware about stock market trading, people have got rid of the taboo of stock market trading. With a Demat Account, you can invest in shares, mutual funds, Initial Public Offers (IPOs), bonds, debentures, etc.
Without a Demat Account, it is impossible to participate in stock market trading directly. In order to make this process hassle-free, National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL) are the two depositories who open free demat Accounts for investors. Demat Accounts have surely helped people in the stock market trading as investors or traders can now trade in the stock market while sitting at home or office.
How Demat Accounts work?
Demat Accounts are used to store all the shares and other financial securities in an electronic form and any kind of currency is not involved in other financial securities. The only way of transferring money from the Demat Account to a bank account is possible when you sell securities such as shares or debentures and get money by selling the securities. Nowadays, almost each and every broker provides an integrated Demat and trading account through which the money an investor gets by selling the securities is automatically credited into the trading account. But it generally takes two days to show the amount credited into your trading account when you sell your securities as the exchange takes T+2 days to settle trades. Once you have the money in your trading account, it can be easily transferred to the registered bank account.
How to transfer money from Demat Account to Bank Account:-
Every Demat Account is linked to a trading account which is further linked to a bank account. If you want to buy or sell shares, you need to transfer money from your bank account to Demat Account before buying or selling shares. But now, Depository Participants (DPs) or brokers accept all the types of major payment methods as the various payment methods have emerged in the last few years. Moreover, you can even trade through multiple platforms like mobile, PC, or tablet. The following is the procedure of money transfer from a Demat Account to a bank account in SMC: –
1) Visit SMC’s online trading website or Mobile App – Smctradeonline.com / SMCACE and then login to your account with your username and password.
2) Once you’re logged in successfully. In the dashboard click on transfer fund & under funds, you’ll have to choose whether you want to add/deposit money for buying new stocks or you want to withdraw the amount raised by the securities you’ve sold.
3) After selecting the suitable option (which in this case is withdrawal), enter the amount of money you want to transfer from Demat/trading to your bank account.
Since dematerialization occurred in 1996, trading in the stock market is very easy and simple as you’re not required to handle anything physically as your securities will be in electronic form. Moreover, a linked Bank, DEMAT & trading account (3 in 1 account) has made it even easier as you can now monitor your holdings without any confusion since all your accounts are linked to each other.