Requirement of Dematerialisation

SEBI introduced the process of dematerialisation of the securities in accordance with Depositories Act, 1996. Dematerialisation is enforced and recommended as it saves money and a lot of time. With the physical keeping of the paper works, there were chances of missing on important documents, theft, damage or loss. Now, we dematerialisation, the original certificates if misplaced, duplicate certificates can be accessed saving cost and labour. Stamp duty is no longer applicable and dematerialised shares receive the credits and bonus and other corporate benefit into the Demat account itself.

 Process for Dematerialisation

1. A ‘Demat account’ needs to be opened with any Depository Participant (DP) which offers Demat Services.
2. Dematerialisation Request Form (DRF) is to be filed and deposited along with the share certificates in order to convert the physical shares into a demat form. On each physical share certificate being submitted, ‘Surrendered for dematerialisation’ is mentioned.
3. The DP submits the request along with physical share certificates to Company, registrars and transfer agents to process the request.
4. The confirmation of dematerialisation is sent to depository upon approval of the request and physical form of share certificate is destroyed.
5. The Depository confirms the dematerialisation of shares to DP and a credit per the shares held is reflected electronically in the investors account.
6. The whole process takes up to fifteen to thirty days from submission of the dematerialisation request.

Groww, AngelOne, Moneycontrol, Zerodha, SherKhan, are few of the DP registered with the CDSL, NSDL which offers a seamless process for opening a Demat account

Advantages of Dematerialisation

1. More secure and reduced cost – one need not worry about forgery, damage or loss or theft of the physical share certificates as it is not converted into digital form and can be accessed from place. Moreover, the stamp duty is not levied on electronic securities, holding charges are nominal, time involved in trading is reduced.
2. Instant transfer – through the process of dematerialisation, transfer is easy and instant, where the physical share transfer from one person to another would take number of days. The funds can be transferred having the bank account linked to the demat account and saves the hassle of manually transferring the fund.
3. Convenience – A person need not be present in person to carry out the transaction or be with broker to execute a transaction. It can be done electronically through a demat account with the depository and ensures all functioning through the smart phone or computer in place.
4. Traceable and paperless – Through the Demat account, once can be monitored the portfolio from any place enhancing the chances to make more profits because of focus and participation with interest. Also, as the shares are held in an electronic form the need for paper work is not there reducing the administrative cost and manual workings.
5. Multiple benefits – Demat account is not only to have the shares in electronic form but also allows to trade in mutual funds, government bonds, exchange funds etc. In additions, it helps in corporate benefits such as dividends, interests and to avail loan benefits against the shared held in dematerialised form.
6. Nominee Inclusion – Demat account allows to have a nominee as a facility to act in the absence of the account holder. It helps to operate efficiently, safeguard and facilitate speed.

The article enlightens and throws light on dematerialisation of shares and securities, the process of dematerialisation and its requirement, advantages of dematerialisation. The registered Depository Participant (DP) i.e., NSDL and CDSL which act as an agent registered with SEBI to provide depository services to traders and investors under the purview of Depositories Act, 1996.