How to Transfer Money from Demat Account to Bank Account?
Until recently, investing in the stock market was viewed as a gamble. However, as financial literacy improved, the fog around investing in the stock market slowly started to lift, and – albeit with some hesitation – investments in the capital market were made.
Capital markets can be accessed indirectly through financial instruments such as mutual funds, or one can also choose to make direct investments. A prerequisite for investing directly in the stock market is to have a demat account.
A demat account allows you to hold, monitor, and manage securities. Before we learn how to enable demat account fund transfer, it is important to know what exactly is a demat account and what falls under its purview.
What is a Demat Account?
Similar to your bank account that holds your money, a demat account holds your shares, securities, bonds, mutual funds, and other financial assets. These financial assets are stored in an electronic (dematerialised) form which enhances the security and makes it easier to transact and start trading. There are two components of a demat account that one must bear in mind: -
- To buy and sell securities in your demat account, you will need to have a trading account. A demat account can only hold financial assets for trading purposes.
- Your demat and trading account are linked to your bank account. For the purpose of trading, you will have to transfer money to your trading account from your bank account.
For ease of understanding, think of a demat account as a place where the shares are stored prior to selling them in the capital markets. As the trading and demat accounts are separate, individuals prefer to keep them with the same broker. The trading account used to buy and sell shares is the bridge between your bank account and the demat account.
How to Transfer Money from an Online Demat Account to Bank Account?
Fund transfer from an online demat account to your bank account is an easy and hassle-free process that can be done online. If you wish to buy or sell any shares, you will first have to do a fund transfer from your bank account to your demat account.
For fund transfer from your online demat account to your bank account, follow the steps mentioned below: -
- Step 1: Log in to your trading account and click on the ‘Funds’ or ‘Account’ section. The name may vary depending on the app and the bank.
- Step 2: You will then be presented with two options: to add funds or withdraw funds
- Step 3: Click on the ‘Withdraw’ option for fund transfer to your bank account
- Step 4: The screen will display the amount of fund transfer that can be done from the total amount. You can then input the amount you need to be transferred to your bank account. The fund transfer can be enabled only after you sell certain securities you hold.
- Step 5: After the fund transfer amount has been added, choose the bank account you would want the amount sent to (in case you have multiple bank accounts) and add the relevant details. Following this, the money will be transferred to your bank account.
The demat account fund transfer is both easy and quick owing to improvements made in the customer interface and the host of online payment methods available. This is why the fund transfer online is better preferred.
The demat account fund transfer is an easy process that aims to encourage investments in the capital market. By carefully analysing the market behaviour and recognising the potential of companies, investors can make informed decisions that will help them gain lucrative benefits in the future.
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An online demat account is a storage space to hold the financial securities of the capital market. It does not hold cash. When you sell the financial securities, the money in lieu of the sale can be transferred from your online demat account to your bank account.
To open a demat account, you will need to decide on a depository participant, which can be an authorised bank, a financial institution, or a broker. You will then be asked to fill out an account opening form and a KYC form which will have to be submitted along with the necessary documents.
Once you sign the agreement form, you will be provided with a unique client ID and a few other details that will enable access to your online demat account. Once you open a demat account, you can start to invest in the capital market and do fund transfers online.
Aside from the KYC form, here are the documents that you will need to submit to open a demat account: -
- PAN card
- Proof of Address: Voter’s ID or Aadhar card, etc.
- ID Proof: Passport or Driving License, etc.
- Passport-sized photographs
Aside from carrying the original copies of the aforementioned documents, you also need to carry their photocopies to open your online demat account.