In 2016, the demonetization policy changed the way we buy and sell things. It was a step towards making India a cashless economy. Similarly, 20 years before demonetization, India witnessed the Dematerialization phase.

  • History

In 1996, a step was taken to free the stock market of physical share certificates. Back then, shares were sold in physical form. If you wanted to buy a share, you paid cash to the trader and got a certificate. Imagine the amount of paper each investor had! Encashing these stocks was also time-consuming. The dematerialization policy aimed to convert the physical certificates into electronic form and simplify the process.

  • What is a demat account?

Just like a bank account holds money, a demat account holds shares, mutual funds, bonds, government securities and electronic traded funds (ETFs). Every time you buy a share, it is credited to your demat account and vice versa. It is mandatory for every investor to have a demat account.

  • Role of a depository

India has two depositories: NSDL and CDSL. They hold the details of all the demat accounts in India in electronic formats. You can open a demat account with any of the two depositories. They facilitate the buying and selling of securities.

  • Role of a depository participant (DP)

Once you have finalized a depository, you can open a demat account with any of its DPs. A DP is a like a retailer. For example, you want to buy a Nestle's Maggi or Cadbury’s Dairy Milk. You will not visit the office of Nestle or Cadbury. You can buy these products from a local supermarket or grocery store. Similarly, you can open an account to be able to transact in securities with a DP. It could be an NBFC or broker or a bank. SAS Online is a reputed DP that facilitates online transactions in the stock market.

  • How to open a demat account?

*  Select a DP:  Choose the one offers good services. You can also select a DP that offers online services like SAS Online by visiting the site

*  Application:  Submit a duly filled demat account opening form along with copies of KYC documents. These include PAN Card, proof of address, proof of identity, and bank account details.

*  Documentation:  On submitting all the documents you receive a copy of rules and regulations and the charges you would incur. A copy of the terms of agreement is also submitted.

*  Verification:  A personnel from DP will visit you in person or call you to verify all the information furnished to them.

*  Account number:  On successful completion of the verification, you will get a unique account number and ID from the DP.

You can now operate your demat account online. You are liable to pay an annual maintenance fee and a transaction fee.

  • Benefits of demat account

*  Your shares are secured as high-level of data privacy standards are followed.

*  You can invest in shares anytime anywhere.

*  Electronic settlements are faster.

*  No risk of theft, loss, non-delivery of certificates.

*  You can buy and sell as less as one share.

*  In one account you can transact in shares as well as debt instruments.

*  Physical securities incurred an extra cost of stamp duty. Demat account saves that cost.

*  Easy to maintain and track.

The dematerialization policy has proved to be a boon for all investors. Will all these benefits and ease of transactions, investing have become easier for beginners too.