Investor Corner/Money matters beyond investing/Practical & Operational
4.1.7 Demat Account and Depositories
A demat account holds shares, ETFs and bonds electronically, and every account sits with one of India's two depositories, NSDL or CDSL. Mutual funds bought directly from an AMC generally do not require one.
What a demat account actually does
Before dematerialisation, shares existed as physical certificates that had to be physically transferred on every sale, a slow and error-prone process. A demat account holds those same holdings electronically instead, with a depository maintaining the official record of who owns what. Buying or selling on a stock exchange settles directly into or out of this account.
The two depositories and where the account actually sits
NSDL and CDSL are the two depositories operating in India, and every demat account is registered with one of them through a broker or depository participant, the account holder rarely deals with the depository directly. Which of the two a specific broker uses is mostly an operational detail and does not meaningfully affect an investor's experience.
When you do, and do not, need one
A demat account is required to hold individual stocks, ETFs, REITs, InvITs, and G-Secs bought through a trading platform. Mutual fund units bought directly from an AMC's own website, or through most fund platforms, are typically held in a separate structure called a statement of account, and do not require a demat account at all, one of the more common points of confusion for someone new to investing.
How PriLytics helps. PriLytics reads your mutual fund statements directly, so tracking those specific holdings never requires connecting a demat account or any trading platform. See how your data stays private.