Evolution Of Demat And Trading Account In India


Demat And Trading Account In India

Nowadays, it is easy to open a trading and demat account online. However, it was much more common to trade online before 1991 when the demat account wasn’t introduced in India. The trade settlements were made by using physical share certificates that were often prone to risks like damage, theft, and forgery. Once you lose these share certificates, it was impossible to get them back and it led to many failures while trading in the Indian stock market.


The year 1991 can be considered to be a landmark year for brokers, investors, and all other stakeholders of the stock market. It was in 1991 that the Indian government decided to dematerialise all the physical share certificates. It meant that the investors were able to hold their share certificates in digital form. By holding these certificates in the demat account, they became the rightful owners of these shares. Also, it was impossible for anyone to steal or damage the dematerialised shares. It also made the trading transparent as each transaction was made from a specific demat account.


To manage the digital share certificates and online trading, two organisations were set up. The first organisation was NSDL and it played a pivotal role in digitising the trading process in India. It built infrastructure of the international standards to manage securities in electronic form. The infrastructure was huge enough to handle all the activities in the stock market and enabled the investors to decrease time, risk, and costs that were associated with physical share certificates.


CDSL i.e. Central Depositories Limited was the next depository that was formed especially for handling the stocks listed in the Bombay Stock Exchange. Nationalised banks such as SBI, Bank of Baroda, HDFC, etc. were the key participants in its formation. Like NSDL, CDSL also focussed on making the trading process hassle-free for investors.


Both CDSL and NSDL managed to revolutionise stock marketing investing and trading in India. They were able to bring this transformation with the help of demat accounts.


Today, the entire process of opening a demat account in India can be completed online with a few clicks. Demat accounts facilitate an easy way to trade online and provide the much needed interface for making smart investment decisions. Though there are many platforms and banks that offer a demat account, you should be careful while choosing one. Apart from looking for a platform that allows you to trade seamlessly across various market segments, you must also check the brokerage rates and other factors while opening a demat account. Some of the main factors that you must analyse before opening a demat account are listed below:


Account opening process


Most investors don’t know how to create a demat accountonline. Therefore, they are mostly looking for a platform that provides a simple procedure for opening an account. However, you must also check the authenticity and credibility of the platform in the market. Also, the platform you choose must not contain any hidden terms and conditions that might affect your investments later.


User experience


Many brokerage service providers allow you to trade via apps these days. Therefore, you can analyse the stocks and invest online from any part of the world now.


The ease of handling trading and investment activities also decide how good or bad a platform is. Therefore, the platform must be user-friendly and simple enough to understand and operate.


Brokerage and other charges


A platform that adopts a transparent brokerage model and allows you to earn more by capitalising on the market fluctuations can be the ideal place to open a demat account.

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