Change is the only constant. From our clothes to food, to the way we live; everything keeps on changing and evolving. And along with everything else, the ways of making money, trading, and investing have also changed and evolved with time. We no longer follow those techniques which our parents used to follow. The last three months saw about 24 lakh new Demat and Trading accounts being opened, and this number predominantly contains youngsters. We are now much more aware and conscious of our investment decisions. At the same time, times are also riskier, and even a few silly blunders may cost you a lot. And one such blunder might be not understanding what a Demat and trading account is?
Let us get down to the basics and start from the beginning.
What is a Demat account?
Almost everyone has a bank account, which lets you deposit and withdraw cash. A Demat account is similar to a bank account which allows you to hold your securities in an electronic form.
Say you have some physical shares, then, in that case, you can simply open a Demat account and hold them in electronic form. Thus, a Demat account offers the safety of your securities. Also, you can keep money in them or withdraw them whenever you want. In order to maintain a Demat account, you need not maintain a minimum balance or hold any stocks. You can open one even without having any stocks in your portfolio with an ITC share price.
Types of Demat account
As you might have understood what a Demat account is, let’s quickly find out its types and varieties and know-how they differ from one another
- Regular Demat account
This is an ideal account if you are a residing Indian and want to store some of your securities or equities in electronic form. If you are interested in investing in IPOs, these accounts can be of use. However, problems arise when you wish to sell them as you will need a trading account for the same. Further, SEBI has brought into the picture a new regulation wherein a holder will not be required to address any maintenance charges if the holdings are less than 50,000.
- Repatriable Demat account
If you are an NRI looking for an account that allows you to transfer funds from the country of your stay into India, then Repatriable accounts are the one for you. This account allows you to transfer up to 1 million USD in a year. However, you will need an NRE bank account for opening this sort of Demat account.
Non – Resident External or NRE account is a bank account that is based on rupee denominations, opened by an NRI to facilitate the various transactions with his or her home country.
- Non- Repatriable account
This is also for those who are residing outside of India. However, unlike in the case of Repatriable accounts, the investor is barred from transacting any money from abroad. You will need to have an NRO account for opening a Non- Repatriable account.