In India, stocks and securities are held electronically in a dematerialized account (or Demat) rather than the investor taking physical possession of the certificates. The investor opens a Demat account when registering with an investment intermediary (or a secondary broker). The dematerialized account number is quoted for all transactions to enable the conduct of electronic transactions transactions. Each shareholder will have a dematerialized account for the purpose of transacting.
Access to the dematerialized account requires an Internet password and a transaction password. You can initiate transfers or purchases of securities. Purchases and sales of securities in the dematerialized account are made automatically once transactions are confirmed and completed.
India adopted the Demat system for electronic storage, where stocks and securities are represented and maintained electronically, thus eliminating the problems associated with paper stocks. After the introduction of the deposit system by the Depositary Law of 1996, the process of sales, purchases and transfers of shares became much easier and most of the risks associated with paper certificates were mitigated.
In 1996, the NSE began trading for shares held in the form of a demat account. It was the beginning of a new environment of paperless stock trading. If an investor buys a stock today, it is credited to the investor's account in two days. Today, the shares are transferred to the demat account of the investor.