Is a demat account the same as a bank account?

No. A bank account holds money; a demat account holds securities like shares, ETFs and bonds. They’re linked, but they do different jobs.

The flow works like this. Money moves from your bank account to your trading account with the broker. You buy shares. The shares land in your demat account. When you sell, the shares leave your demat account and the money eventually goes back to your bank.

So three accounts are involved: bank, trading and demat. Most brokers open trading and demat together, and you link your bank account to them.

A couple of differences people miss:

• Your demat account doesn’t earn interest. Idle cash sitting with your broker usually doesn’t either.
• A demat account has its own charges, such as annual maintenance and DP charges, which a savings account doesn’t.

Example: Priya transfers ₹30,000 from her bank to her broker and buys 60 shares at ₹500. Her bank balance drops by ₹30,000, her demat shows 60 shares, and her trading account cash is now close to zero.

Some banks also offer demat accounts under a 3-in-1 setup. Since 1 February 2025, qualified brokers also have to offer a UPI block option, where funds stay blocked in your bank until a trade settles.

These basics are covered on day one of our beginner diploma course.