It means holding of securities in electronic form in lieu of physical certificates. It is comparable to keeping one's money in a bank account.
In Demat form, physical share certificates are replaced by electronic book entries, purchase of shares are reflected as credits in demat account and sales are reflected as debits.
The risk associated with physical share certificates such as loss, replacement, theft, damage etc. are overcome in the share certificates held in dematerialised form which are totally risk free.
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