Project on Demat Account

2634 Words Nov 21st, 2010 11 Pages
| | |The term Demat, in India, refers to a dematerialised account. For individual Indian citizens to trade in listed stocks or debentures. The Securities Exchange Board of India (SEBI) requires the investor to maintain a Demat account. In a demat account shares and securities are held in electronic form instead of taking actual possession of certificates. A Demat Account is opened by the investor while registering with an investment broker (or sub broker). The Demat account number which is quoted for all transactions to enable electronic settlements of trades to take place.
Access to the demat account requires an internet password and a transaction password as well as initiating and confirming transfers or purchases of securities.
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It is the system where no paper is involved. Physical form is extinguished and shares or securities are held in electronic mode. Before the introduction of the depository system by the Depository Act, 1996, the process of sale, purchase and transfer of shares was a huge problem and the safety perspective was zero.

Demat Benefits

The benefits are enumerated as follows: . Its a safe and convenient way to hold securities . Immediate transfer of securities is there . There is no stamp duty on transfer of securities . Elimination of risks associated with physical certificates such as bad delivery, fake securities, delays, thefts etc. . There is a major reduction in paperwork involved in transfer of securities,reduction in transaction cost etc. . No odd lot problem, even one share can be sold thus there is advantage . Change in address recorded with DP gets registered with all companies in which investor holds securities electronically eliminating the need to correspond with each of them separately; • Transmission of securities is done by DP eliminating correspondence with companies; • Automatic credit into demat account of shares, arising out of bonus/split/consolidation/merger etc. • Holding investments in equity and debt instruments in a single account.
Benefit to the Company
The depository system helps in reducing the cost of new issues due to less printing and distribution cost. It increases the efficiency of the registrars and

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