4. What is a Demat Account?
Demat is short name of dematerialized account. If one has to save money or make cheque payments, then he/she needs to open a bank account. Similarly, one needs to open a Demat account if he/she wants to buy or sell stocks. Thus, Demat account is similar to a bank account wherein the actual money is being replaced by shares. In order to open a Demat account, one needs to approach the Depository Participants [DPs]. In India, a Demat account is a type of banking account that dematerialise paper-based physical stock shares. The Demat account is used to avoid holding of physical shares, the shares are bought as well as sold through a stock broker. In this case, the advantage is that one does not need any physical evidence for possessing these shares. All the things are taken care of by the DPs.
