Types of Demat Accounts in India

Types of Demat Accounts in India 

Participating in the Indian stock market requires a clear understanding of the tools that enable buying, selling, and holding securities. One of the most essential tools is a Demat account. Before opening one, investors should understand the types of Demat accounts in India and how each serves different investment needs. 

This blog explains what a Demat account is, why it is required, the different types of Demat accounts available in India, and how to choose the right option based on your residency status and investment objectives. 

What is a Demat Account and Why Do You Need One? 

A Demat account, short for dematerialised account, is used to hold financial securities such as shares, bonds, mutual funds, exchange-traded funds (ETFs), and government securities in electronic form. Instead of physical certificates, all holdings are stored digitally through recognised depositories such as NSDL and CDSL. 

Understanding what a Demat account is important because it is mandatory for investing or trading in listed securities in India. A Demat account eliminates the risks of physical certificates, reduces paperwork, and enables faster and safer settlement of transactions. 

The primary reason why a Demat account is needed is regulatory. Indian stock exchanges require securities to be held electronically, making Demat accounts essential for equity delivery trades, IPO investments, and long-term portfolio management. 

Also Read: What Is Dematerialisation? 

The Role of Demat Account in the Indian Stock Market 

The Demat account in the Indian stock market plays a central role by acting as a digital repository for securities. When an investor purchases shares, they are credited to the Demat account, and when shares are sold, they are debited automatically.  

Demat accounts also ensure smooth processing of corporate actions such as dividends, bonus shares, stock splits, and rights issues. Without a Demat account, it is not possible to hold equities or participate in public market investments in India. 

Additional Read: How to Start Online Trading in India? 

Key Types of Demat Accounts Available in India 

There are several different types of Demat account options designed to meet the needs of resident Indians and non-resident investors. Understanding the types of Demat accounts in India helps investors remain compliant with regulations while managing investments efficiently. 

Broadly, the type of account under Demat classification includes: 

• Regular Demat Account for resident Indians 
• Repatriable Demat Account for NRIs 
• Non-Repatriable Demat Account for NRIs 
• Basic Services Demat Account (BSDA) 

Each account type differs in eligibility, repatriation rules, and cost structure. 

(1) Regular Demat Account for Resident Indians 

A regular Demat account is designed for individuals residing in India who wish to invest or trade in securities. This is the most common Demat account and is suitable for retail investors, traders, and long-term equity holders. 

A Demat account for resident Indians allows electronic holding of shares, mutual funds, ETFs, bonds, and government securities. It supports equity delivery trades and IPO participation. However, trading in futures and options does not require holding securities in a Demat account, as these contracts are settled without delivery. 

(2) Repatriable Demat Account for NRIs 

A repatriable Demat account is meant for non-resident Indians who wish to invest in Indian securities while retaining the ability to transfer funds abroad. This Demat account for NRI investors must be linked to a Non-Resident External (NRE) bank account. 

The key feature of a repatriable Demat account is that both the investment amount and returns can be repatriated, subject to RBI regulations. Once an individual becomes an NRI, any resident Demat account must be closed or converted, and holdings must be transferred to an NRI-specific Demat account. 

(3) Non-Repatriable Demat Account for NRIs 

A non-repatriable Demat account is also intended for NRIs but comes with restrictions on fund transfer outside India. This account must be linked to a Non-Resident Ordinary (NRO) bank account. 

In this type of Demat account, funds and investment proceeds cannot be freely repatriated. As per RBI guidelines, repatriation is allowed up to USD 1 million per financial year, subject to taxes and documentation. This option is commonly used when investments are made using income earned in India. 

(4) Basic Services Demat Account (BSDA) 

A Basic Services Demat Account, commonly referred to as a BSDA account, was introduced by SEBI to promote financial inclusion and encourage small investors to enter the capital markets. 

BSDA accounts function similarly to regular Demat accounts but offer lower or zero annual maintenance charges based on the value of holdings, making them ideal for first-time and low-volume investors. 

Also Read: Types of Trading in the Stock Market