According to SEBI standards, if an individual desire to make any form of investment in the stock market, he or she must have a Demat Account. That makes learning the various sorts of Demat Accounts just as vital as having one to trade with. You cannot participate in any type of stock market trading unless you have a Demat account. However, to make effective stock market trading decisions, you’ll need the right type of Demat account.
Also, there is another indirect market participation you can make, such as investing in mutual funds, which is an indirect stock market participation that does not require a Demat account. As a result, a Demat account is required for solely direct stock market investments.
Demat Accounts Are Divided into Three Categories:
- Regular Demat Account
The primary objective of a regular Demat account is to make trading activities even more straightforward. It means that, as compared to weeks or months, the transfer of shares must be done in a couple of hours.
Charges for a regular Demat account are decided by the kind of subscription, account volume, and all other terms and circumstances set by the depository and the depository participant (DP).
One of the most significant advantages of having a regular Demat account is that it provides an ease to all of its users. Additional fees such as market stamps and limits on selling shares have been eliminated, allowing investors to save money.
Thus, having a regular Demat account simplifies and streamlines the procedure of dealing with stocks and shares.
- Repatriable Demat Account
NRIs who want to invest in Indian shares should open a repatriable Demat account. This account is beneficial to all Non-Resident Indians (NRIs) because it allows them to transfer funds to several other nations. NRIs who want to open a repatriable Demat account, on the other hand, will need an NRE bank account.
If a Non-Resident Indian (NRI) wants to open a repatriable Demat account, he or she must follow the Foreign Exchange Management Act’s provisions to the letter (FEMA).
The Reserve Bank of India has made it mandatory to create a trading account with a specified institution that is largely regulated by the RBI.
An NRI must invest in either a Non-Resident External (NRE) or a Non-Resident Ordinary (NRO) account to route their funds.
- Non-repatriable Demat Account
Non-repatriable Demat account is similar to a repatriable Demat account as they are only available to non-resident Indians.
However, because this account requires an attached NRO bank account, NRIs do not have the right to transfer funds abroad.
NRIs who have both NRE and NRO accounts would not have any problems. An NRI can invest up to 5% of his or her paid-up capital in any Indian company, according to RBI standards.
An NRI can invest in Initial Public Offers (IPOs) utilizing an NRE Demat account and funds in an NRE (Non-Resident External) bank account on a repatriable basis. NRO and Non-Resident Ordinary Rupee (NRO) Demat accounts will be used if an NRI invests money in a non-repatriable manner.
The above-mentioned Demat accounts were created with certain goals in mind. A standard Demat account can assist any resident Indian in processing all of their stock market investments and keeping track of transactions other than Futures and Options.
However, if you are an NRI, the world of trading is quite different; there are many restrictions. You can always rely on our professional traders to guide you through this process, such as complying with the Foreign Exchange Management Act’s rules for setting up a repatriable/non-repatriable Demat account.