Demat account is an improved version of having physical possession of cheques. Nowadays, cheques are dematerialized and securities are purchased and sold online. An internet password is required to access a demat account. Demat account facilitates immediate transfer of securities and a convenient way to hold securities. With a demat account, one can hold investments in equity and debt instruments in a single account. It also helps to avoid bad deliveries caused by signature mismatch, postal delays and loss of certificates in transit. Demat account holders also avoid stamp duty. Further it also eliminates risks associated with forgery and loss due to fire, theft etc.
Securities & Exchange Board Of India (SEBI) has made it mandatory to get a demat account opened for share trading above 500 shares. SEBI has taken various policy initiatives to popularize the demat concept. One of them is delivery of demat shares compulsorily for institutional investors and OCBs. However, these investors have been allowed to buy shares in physical form, get them transferred in their names and thereupon get them dematerialized.
There are some necessary activities for dematerialization of securities:
1. Investors should have a depository account.
2. Securities should be from the eligible list of securities issued by the
depository.
3. Securities must be in the name of the account holders and owned by him.
4. Separate demat requisition form is required for each issuer company.

Some schemes under Demat account are easy trading, fast trading and power trading. However, investors are allowed to apply for the IPO, even if they are not demat account holders. But there are risks in the scheme. Due to a faulty beneficiary account number, there will be some delay in share allotment. A safer method to subscribe to the issue will be to take a demat account.

Demant Account