Types of Demat Account and Which Demat Account is Best for Beginners
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Having a demat account is a pre-requisite for carrying out transactions in the stock market. Whether you want to buy shares, sell shares or simply hold them in the electronic form, you need a demat account.
In fact, your demat account holds all your shares, government securities, bonds, mutual funds and exchange-traded funds in a dematerialised form. Introduction of demat account has simplified the entire process of trading and investing in the stock market.
In the recent few years, the markets regulator – Securities and Exchange Board of India (SEBI) has made it compulsory for every trader and investor to hold a demat account. Therefore, traders and investors who wish to transact in the Indian stock market, have to smartly choose a demat account. Although the purpose of a demat account remains the same for different investors, there are different types of demat account for different investors. Let us learn about them in details.
Types of Demat Account
Essentially there are 3 types of demat accounts. They are:
Regular Demat Account
A regular demat account is used by traders and investors residing in India.It is ideal for people who majorly deal with equity shares.
Repatriable Demat Account
A repatriable demat account is useful for Non-Resident Indians (NRIs) as it allows funds to be transferred abroad. However, the primary requirement for holding this type of demat account is to have a Non-Resident External (NRE) bank account associated with it.
Non-Repatriable Demat Account
Just like a repatriable demat account, non-repatriable demat account is also useful for Non-Resident Indians but the only difference is that this account does not allow funds to be transferred abroad. The primary requirement for holding this type of demat account is to have Non-Resident Ordinary (NRO) bank account associated with it.
Each of the above mentioned demat accounts serves varying purposes for a trader or investor. Depending on your residential status, you may opt to open a demat account that suits you the best.
The process of opening a demat account is simple for a resident Indian as compared to NRIs who have certain restrictions for account opening. NRIs also have to conform to the rules of the Foreign Exchange Management Act (FEMA) before opening a demat account.
If you wish to open a demat account, you may consider opening your account with Kotak Securities.