What is a Demat Account?
Until the late eighties Indian stock market was overwhelmed by paper shares which were becoming increasingly difficult to maintain. There were various problems faced due to practice of paper shares such as fake and stolen shares, fake signatures and signature mismatch, duplication or mutilation of shares, and transfer problems. On top of all these risks, the system had cumbersome procedures and excessive paperwork.
To avoid all such problems, government of India came up with a new system where trading should be through "Dematerialized" form with the help of an account called Demat account. You don't have to possess any physical share-certificates showing that you own these shares. They are all held electronically in your account.
If you want to buy or sell stocks you need to open a Demat account in India. It is just as opening an account with a bank. To open your Demat account you have to approach the DPs (Depository Participant). Demat account will help you to buy and sell shares without endless paperwork and delay.As you buy and sell the shares, they will be automatically adjusted in your account. The charges for account opening, annual account maintenance fees and transaction charges vary between DPs (Depository participants).