How is a demat account different from a bank account? Here are the key distinctions
Demat Account: A demat account is primarily used for holding and trading securities such as stocks, bonds, mutual funds, and exchange-traded funds (ETFs) in electronic form. It allows investor to buy, sell, and transfer securities seamlessly. Bank Account: A bank account is used for storing and managing money.
It facilitates various financial transactions such as deposits, withdrawals, transfers, bill payments, and online transactions. Demat Account: Securities held in a demat account are in electronic or digital form. These include stocks, bonds, debentures, mutual fund units, government securities, and other financial instruments.
Bank Account: Bank accounts hold funds in the form of cash, which can be deposited, withdrawn, or transferred as required. Some bank accounts may also hold fixed deposits, savings certificates, or other financial products offered by the bank. Demat Account: Demat accounts are regulated by securities market regulators such as the Securities and Exchange Board of India (SEBI) in India.
Depositories like the National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL) oversee the functioning of demat accounts. Bank Account: Bank accounts are regulated by banking regulators such as the Reserve Bank of India (RBI) in India. Commercial banks, cooperative banks, and other financial institutions offer bank accounts and are responsible for their operation and compliance with regulatory guidelines.
Demat Account: Transactions in a demat account involve buying, selling, and transferring securities. Investors can trade securities on stock exchanges through their demat accounts. Bank Account: Transactions in a bank account involve deposits, withdrawals, transfers, and
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