There are 3 important terms in understanding the Demat account in India.
1. Dematerialisation
It is a process that facilitates the conversion of share certificates from physical to electronic form where shares held thereafter are easier to manage while providing more accessibility from anywhere around the globe.
Dematerialisation also allows you to monitor and track your holdings seamlessly, on the go.
2. Depositary participants
A depository participant acts as an intermediary or agent of a central depository and provides namesake services to investors and traders. India currently has two central depositories registered with the apex trading and investment regulatory body SEBI.
NSDL
CDSL
A depository participant must, therefore, be registered with either of these two licensed operators to open a Demat account.
3. Unique 16-digit client ID
Each Demat account is assigned with a unique 16-digit client ID that acts as the investor's identity. The first 8 digits of the ID represent the depository participant while the last 8 digits act as a unique identification for the investor, facilitating the sale or purchase of shares and securities.