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Dematerialisation- An Overview

The process of dematerialisation allows you to convert shares and other securities in physical form into digital form. Dematerialisation aims to make the process of buying, selling, transferring, and holding various securities easy and cost-efficient. The dematerialisation process allows you to keep all your securities electronically. Let’s go deep into the concept of dematerialisation.

Investors may find it challenging to track all the documents in paper form. It is possible to lose an important document among an increasing number of papers daily. Therefore, investors may incur problems owing to losing the original certificates. Along with that the stock market in India may face a breakdown due to such situations. However, people with dematerialised shares get credits and bonuses. Therefore, they will not incur any chance of loss when using demat accounts.

The responsibility to hold the shares and other securities of every shareholder in India is with a depository. A DP acts as an agent that offers traders and investors depository services by following the Depositories Act, of 1996. They provide the facility of electronically holding various securities like bonds, government securities, mutual fund units, etc., through various depository participants (DPs). They don’t only hold multiple securities but also maintain a record of securities with demat accounts.

In today’s world, executing any random trade fast and securely is possible owing to the availability of depositories and depository participants (DPs). Trade settlements happen two working days after the completion of the transaction (T+2). There is no paperwork for investing and trading in the stock market.

At present, two depositories registered with the Securities and Exchange Board of India (SEBI) can operate in India. These depositories are National Securities Depository Ltd. (NSDL) and Central Depository Services (India) Ltd. (CDSL).

What is the Process of Dematerialisation of Shares?

It is elementary to dematerialise shares and other securities simply and easily. A few days are required to complete the dematerialisation process of shares. Let’s understand the process of dematerialisation in detail.

  • Firstly, you must open a demat account with the help of a depository participant (DP) on a depository. Here, DP can be any stockbroker, bank, or other financial intuition that allows you to open a demat and trading account and trade or invest in the stock market in India.
  • After opening a demat account, you must submit a duly-filled Dematerialisation Request Form (DRF) and your physical share certificates to your DP.
  • If holding multiple shares of various companies, submit a duly-filled DRF for every company. You will also have to submit the relevant share certificates.
  • After you submit the DRF, your DP will go through the form and securities to understand whether everything is in order.
  • You will get a Dematerialisation Request Number (DRN) in the form of an acknowledgement after your DP feels satisfied with your request.
  • The company’s Registrar and Share Transfer Agent (RTA) will receive your request from your DP.
  • After your dematerialisation request gets approval from the company’s RTA, the share certificates will be converted from physical form into electronic form.
  • In the end, you will get your dematerialised shares into your demat account. Then, it is up to you whether you want to sell or transfer your electronic shares into other accounts.
Features of Dematerialisation

The dematerialisation process includes various customer-centric features that make investors and traders execute both buying and selling orders easily yet effectively. It is helpful for investors to make well-informed decisions to invest in the stock market in India. Physical shares will be converted to electronic form so that investors can find it convenient to buy and sell with their demat accounts. It is safe and secure to carry out share trading after its dematerialisation because transactions will go into the cross-checking process by the depository institutions. In addition, demat account opening comes under the process of dematerialisation. Thus, investors can effortlessly use various features like stock analysis, financial reports, data charts, etc.

A List of Benefits of Dematerialisation

It is evident that a lot of investors held physical share certificates before 1996. The National Securities Depository Limited (NSDL) introduced the concept of the demat system in 1996. NSDL is hugely supported by the National Stock Exchange of India (NSE). The Securities and Exchange Board of India (SEBI) made it mandatory to go after the dematerialisation process.

Safety

With dematerialisation, you will not have to worry about losing, forgery, and misplacing shares that come with physical shares. Thus, there is tight security that comes with shareholdings. In addition, with dematerialisation, you can hold your investments in secure depositories.

Cost-efficiency

It is cost-effective to open a demat account and trade and invest in shares. Thus, expenses will not exist because there will not be much cumbersome paperwork.

Flexibility

There will be more flexibility with dematerialisation. Thus, everyone can access it, no matter whether they are small or big investors. It is possible to trade more than one share unit without any restrictions.

Convenience

With the digital nature of dematerialised shares, you will not have to worry about storage and maintenance. In addition, you will be worry-free about the loss and damage of share certificates.

Accessibility

All the shares are recorded and maintained in an electronic form. It is possible to access dematerialised shares and other securities from any place at any time by using the Internet.

What is Rematerialisation?

The process of rematerialisation is utterly different from that of dematerialisation. Rematerialisation facilitates the conversion of shares and other securities from electronic form to physical form. Investors can rematerialise any financial asset whenever they are willing to, and it will be completed within 30 days. However, after the rematerialisation of shares, they will not remain liquid, so it is difficult to trade them. Investors can trade their shares only in electronic form. Therefore, the process of dematerialisation is required.

Conclusion

It is easy to dematerialise shares and other securities. Much time will not be required in the process of dematerialisation. Share trading is much easier today owing to the dematerialisation process. Opening a trading account with Share India opens up a new portal of tremendous reach and accessibility in this stock trading process. You are aware of what dematerialisation is. you will find it easy to open a demat account and send a dematerialisation request to your DP to get your physical shares converted into electronic form.

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