Demat account
A demat account holds your shares and other securities in electronic form, the way a bank account holds your money.
What it is
Shares used to be paper certificates. Demat, short for dematerialised, means they are held electronically instead. Your demat account is where the shares you own are recorded.
In India, two depositories hold these records: NSDL and CDSL. You do not deal with them directly. You open the account through a depository participant (DP), usually your broker or bank.
Demat vs trading account
A trading account is what you use to place buy and sell orders on the exchange. A demat account is where the shares are kept after you buy them. Most brokers open both together and link them to your bank account.
When you buy, money leaves your bank or trading balance and shares arrive in your demat account after settlement. When you sell, shares leave your demat account and money comes back.
Keeping it safe
Your shares are held in your own name at the depository, not in the broker’s name. You can check your holdings in the statements sent by NSDL or CDSL, which is a good way to confirm your broker’s records match.
Never share your login, OTPs or PINs with anyone, including people who claim to be from your broker. Add a nominee, keep your contact details updated, and read any authorisation you are asked to sign.
Buying shares through your accounts
You have ₹30,000 in your trading account. You buy 50 shares at ₹480, costing ₹24,000 plus charges. After settlement the 50 shares appear in your demat account. Months later you sell 20 of them at ₹520. Those 20 shares leave your demat account and about ₹10,400, less charges, is credited back to you.
Common mistakes
- Confusing the demat account with the trading account.
- Sharing OTPs or login details with callers claiming to be from the broker.
- Not adding a nominee or updating contact details.
- Never checking depository statements against the broker’s app.
Where are your shares actually held after you buy them?
- In your demat account, recorded with a depository like NSDL or CDSL
- In your bank savings account
- In the company’s office as paper certificates
Show the answer
In your demat account, recorded with a depository like NSDL or CDSL. Shares are held electronically in your demat account. The depository keeps the record; your broker or bank acts as the depository participant.
Common questions
What is the difference between a demat and a trading account?
A trading account is for placing buy and sell orders. A demat account stores the shares you own. You need both to invest in shares.
Is it safe to keep shares in a demat account?
Shares are held in your name with a depository, which is a well-established system. Most risks come from sharing login details or signing authorisations you do not understand.
Can I have more than one demat account?
Yes, you can open demat accounts with more than one depository participant. Each is linked to your PAN.
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