Number of demat accounts in India crosses 10 crore mark

Tags: National Economy/Finance

According to data released by depository firms National Securities Depository Limited (NDSL) and Central Depository Services (CDSL), over 22 Lakh new accounts were opened in August, taking the figure to 10 crore and five lakh. In March 2020, the total number of demat account holders in India was four crore and nine lakh.

IMPORTANT FACTS -

• CDSL is currently the largest depository in the country in terms of active demat accounts.

What is the need for a Demat account ?

• If a person wants to buy and sell securities (shares, bonds etc.) on the National Stock Exchange (NSE), Bombay Stock Exchange (BSE) or other exchanges, he or she needs a trading account, demat account. Both the account has to be linked with the person's bank accounts.
• Trading accounts are needed for the purpose of buying and selling securities.

Then what is a Demat account ?

• Demat is an abbreviation of dematerialised. Dematerialised means which is not in physical form but in an electronic form.
• Market regulator securities and Exchange Board of India (SEBI) has made it compulsory for the companies to issue securities in electronic forms only. Earlier they were issued in physical or paper forms. 
• So a person who buys the securities needs a place where to deposit the securities. 
• Here the facility is offered by Depository Participants (DP).
• The investor opens Demat accounts with a SEBI registered Depository Participants (DP) to keep their shares, bonds, debentures etc. in electronic form. 
• The Demat account is linked with the trading account so that the investor can smoothly buy and sell the securities.  

ADDITIONAL INFORMATION -

Depositories Participants :

• They are financial institutions which are a member of Depositories and they offer the Demat account facilities to the investor. They could be banks, share broking companies etc.

Depositories :

• hey are set up in India after the enactment of the Depositories Act 1996. They are licensed and regulated by SEBI.
• There are two Depositories in India and both are based in Mumbai, Maharashtra. 
• They are National Securities and Depositories Limited (NDSL) and Central Depositories Services India Ltd (CDSL).
• NSDL was the first depository to be set up in India in August 1996.
• CDSL was set up in 1999.

What do they do ?

• They convert the securities (shares, bonds, etc) issued by companies into electronic form, enabling their buying and selling in the capital market (popularly known as share market). SEBI has made the dematerialisation of securities compulsory in India.