Dematerialization is the process by which physical share certificates held by an investor are converted into an equivalent number of securities in electronic form and credited into the investor’s demat account. Demat account is the account that holds all your shares in electronic or dematerialized form.
This account can be opened with investment broker and most of the banks in India also provide demat account services apart from the normal savings/current account. Like the bank account, a demat account holds the certificates of your financial instruments like shares, bonds, government securities, mutual funds and exchange traded funds (ETFs).
The demat account number can be quoted for all/any transactions which take place, the object of this account is for trading/invesment. It is mandatory for every person to have the Demat account for the purpose of trading shares.