What is Demat account and why it is required?

¨ Securities and Exchange Board of India (SEBI) is a board (corporate body) appointed by the Government of India in
1992 with its head office at Mumbai. Its one of the function is helping the business in stock exchanges and any other
securities markets.
¨ Demat (short form of Dematerialization) is the process by which an investor can get shares (also called as physical
certificates) converted into electronic form maintained in an account with the Depository Participant (DP).
¨ DP could be organizations involved in the business of providing financial services like banks, brokers, financial
institutions etc. DP’s are like agents of Depository.
¨ Depository is an organization responsible to maintain investor's securities (securities can be shares or any other
form of investments) in the electronic form. In India there are two such organizations called NSDL
(National Securities Depository Ltd.) and CDSL (Central Depository Services India Ltd.)
¨ Investor’s wishing to open Demat account has to go DP and open the account.
¨ Opening the Demat account is as simple as opening the bank account with any bank. As you need bank account to
save your money, make cheque payments etc, likewise you need to open a demat account if you want to buy or sell
stocks.
¨ All shares what you possess will show in your demat account, so you don't have to possess any physical
certificates. They are all held electronically in your demat account. As you buy and sell the shares, accordingly your
shares will get adjusted in your account.