If you want to trade in equities then a demat account is a must. What do we understand by a demat account? Let us look at demat account as the equivalent of a bank account for your stocks and shares. Just as you keep your money in your bank account, you can keep shares and stocks in your demat account. A Demat account is a digital platform for holding your shares. Today, you can not only hold stocks but also bonds, mutual funds, gold bonds, government debt as well as insurance policies in your demat account. You can hold gold bonds issued by RBI also in demat form and it is assigned a unique ISIN number. You don’t need a separate demat account and these gold bond can be held along with your other equity holdings in a single demat account.
When you buy shares in your trading account, your demat account gets credited on T+2 day. Similarly, when you sell shares your demat account gets debited on T+1 day. You can look at the demat account as a bank account that holds your investments in custody. What do you do in case you are holding physical share certificates? You can actually dematerialize these share certificates by handing over your share certificates along with a signed demat request form (DRF) to your broker. The shares will be verified and then dematerialized and after canceling the certificates, the equivalent number of shares will be credited to your demat account.