How to Transfer Money from Demat Account to Bank Account

Technological advancements have made investing in the stock market more convenient, affordable, and safe. So, you may be wondering about how to transfer money from a Demat account to a Bank account and also the ways to transfer money from a Demat account to a Bank account.

Transferring money from a Demat account to a bank account is safer and more accessible at present. The past few years have shown a sharp rise in demand for stock market investments. People can also access the stock market indirectly by investing in mutual funds. One of the most essential elements for trading is the Demat account.  

Before heading towards transferring money from a Demat account to a bank account, let’s understand what a Demat account is and how it works. 

What is a Demat Account?

A Demat or Dematerialized account is a place to hold and manage shares, stocks, bonds, and other securities in electronic form. The National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL) are the depositories in India. These depositories are linked to a stock exchange. 

For better understanding, we can consider the stock market just like a warehouse where the retailer holds all the received stocks for selling them in the market. 

An investor is also required to open a trading account for buying and selling securities in your Demat account. A trading account is like a bridge that connects the Demat and the bank account. 

How Does a Demat Account Work?

A Demat account works like a bank account, holding your shares and other assets. You buy shares through the account, and they are debited from the account when you sell them. These are stored as electronic copies and are in a dematerialized form. 

Though a Demat account is necessary, the trading account is also required for investments. Almost all brokerage houses come with a trading account. 

All the cash flow and credit or debits are reflected in the trading account. If you want to buy or sell stocks, you have to place a request for this from your trading account linked to your Demat account, which is then forwarded to the stock exchange by the depository participant. If you want to buy stocks, the Stock exchange looks for anyone willing to sell the shares. 

The clearance houses will then issue orders to debit shares, and shares will then be debited from the seller’s Demat account and credited to the buyer’s account. If you sell the stocks, returns get credited to the trading account within two days or more, and then the money will dematerialize and be transferred to your bank account.

Transfer Money From a Demat Account to a Bank Account

Nowadays, it is not complicated to transfer money from a Demat account to a bank account. There are dozens of online brokerage platforms to open a Demat and a trading account. Demat accounts are linked to a trading account linked to the bank account. You only need a smartphone to make transactions from Demat to a bank account; the whole process is paperless. 

Money cannot be transferred directly from your Demat account to your bank account. Only through a trading account can you connect with a bank for any transfers; this is why a Trading account acts as a bridge between your bank and Demat account. 

The Measures and Steps to Transfer Money From a Demat account to a Bank Account

1. Login to your trading account linked to your Demat account. Then click on the ‘Funds’ section or ‘Accounts’ section. Almost all brokerage apps in India have their fund activities in the ‘Funds’ section or ‘Accounts’ section.
2. Once you are in the funds’ section window, you can see two options- add funds or withdraw funds.
3. If you want to buy securities, then you select the add funds option. Then, click on the ‘withdraw option’ to transfer money from the Demat account to the bank account.
4. After selecting the ‘withdraw option,’ you can see the total amount in your trading account that can get transferred. Then you will be asked to enter the amount you wish to transfer. Don’t get confused with the amount displayed on the home page as the total transferable money. You can only transfer the funds received by you after selling securities in the Demat account. 
5. Brokerages usually provide some leverage for trading and display the total limit as per the trading leverage on the home page. The limit depends on the funds you add to the trading account and the securities held in your Demat account. So the total fund limit is not the same as the amount you can transfer. 
6. Then enter the amount of money you wish to transfer from your Demat account to your bank account. You can choose the bank account to which you want to transfer the money. You will be asked to enter some relevant details like the bank account details in which you want the money to be transferred. Then you can enter the password to initiate the fund transfer. Depending on the mode of transfer chosen, the amount is credited to your bank account within a few minutes or may take hours.         

Conclusion

The procedure to transfer money from a Demat account to a bank account is very simple. You only need a smartphone with any brokerage house’s online stock marketing app. Linking three accounts, Demat, trading, and bank accounts, has made it easy to complete any transaction instantly.

Frequently Asked Questions (FAQs)