Demat Account Law and Legal Definition

Demat refers to a dematerialised account. Though the company is under obligation to offer the securities in both physical and demat mode, one have the choice to receive the securities in either mode. Demat Account is an account offered by a bank in its capacity as a depository participant. The demat account reduces brokerage charges, makes pledging/hypothecation of shares easier, enables quick ownership of securities on settlement resulting in increased liquidity, avoids confusion in the ownership title of securities, and provides easy receipt of public issue allotments. It also helps to avoid bad deliveries caused by signature mismatch, postal delays and loss of certificates in transit. Further, it eliminates risks associated with forgery, counterfeiting and loss due to fire, theft or mutilation. Demat account holders can also avoid stamp duty, avoid filling up of transfer deeds, and obtain quick receipt of such benefits as stock splits and bonuses. Nowadays, it is necessary to open a demat account to buy or sell stocks.