Dematerialization is the process of converting your physical shares and securities into digital or electronic form. The basic agenda is to smoothen the process of buying, selling, transferring and holding shares and also about making it cost-effective and foolproof. All your securities are stored in an electronic form instead of physical certificates. Let us delve deeper into the topic of dematerialization.
Two depositories called Central Depository Services India Limited (CDSL), and National Securities Depository Limited (NSDL) is registered with the Securities and Exchange Board Of India also known as SEBI.
It’s sometimes hard to keep track of all the paper-based documents. Moreover, the increasing amount of papers day by day may lead to missing an important document. It can become the cause of the break down of the Indian Share Market and any businesses associated with it. Not only that, if a share is being transferred 0.5% is saved for stamp duty. If the original certificates are somehow misplaced it saves time and money in obtaining duplicate certificates. Shares that are dematerialized receive credits and bonuses right into their account hence no chances of loss in transit followed by fewer interest charges for loans associated with Demat accounts.
The Dematerialization starts with opening a Demat account. So, let’s first see how to create an account.
A Demat account provides you the facility to carry out the transactions electronically. There is no need for you to be physically present at the broker’s place to settle a transaction. Moreover, the investor can have access to the Demat account using a computer or smartphone. In addition, you can convert your physical holdings into electronic format to become the legal owner of your shares.
By linking your Demat account with the bank account you can easily transfer funds electronically. This saves you from the hassles of drawing a cheque or transferring the funds manually.
Demat account is the most secure and safest way to carry out transactions by electronic means. All the risks like theft, damage, loss of share certificates, etc. that were associated with holding shares in physical form are completely eliminated.
Demat account provides you the facility to grant the right to operate your Demat account to the nominee in your absence. With this facility, you can carry out transactions in your Demat account with the help of a nominee when you are not in a situation to do it yourself.
One of the main benefits of using a Demat account is that it excludes the need for paper. Since the Demat account is about holding shares or securities in electronic form, the need for the paper is almost zero. In addition, the Demat account has also proved to be very useful for the companies in reducing their administrative costs and hassles. Furthermore, cutting down paper usage is also good for the environment.
The Demat account helps you in availing loans against the holdings in dematerialized form. The securities and shares held in Demat account can be kept as collateral and loan can be taken against them.
With the help of a Demat account, you can monitor your portfolio from your home, office or anywhere across the globe. The flexibility to be able to monitor the portfolio performance enhances the chances of you making more profits because of the increase in participation and interest.
Demat account eases the process of receiving various corporate benefits like dividends, interest, refunds, etc. All the benefit amount gets directly credited into the Demat account. Moreover, other benefits like stock splits, bonus shares, rights shares, etc. get directly updated into the Demat account.
In the Demat account, you can not only hold shares or equities but also debt instruments. You can even purchase, hold and sell mutual fund units through the Demat account. In fact, you can even purchase government bonds, exchange-traded funds, etc. in the Demat account
Dematerialisation will ordinarily take around 30 days. On the off chance, if the process takes more than 30 days, you must contact your DP. If he can't support you, at that point you can send your complaint to the individual Investor complaint cell of NSDL or CDSL.
YES, A trader can open more than one account in a similar name with a similar DP and furthermore with various DPs. For all these accounts, the financial specialist needs to carefully consent to KYC standards including Proof of Identity, Proof of Address necessities as stipulated by SEBI and furthermore give PAN number. The trader needs to show his PAN card at the hour of opening of Demat account.
No. The depository has not directed any minimum balance. You can have zero balance in your account.
Yes. The investor can submit an account closure request to his DP in the given form. Further, the DP will transfer all the securities lying in the account, as per the instruction, and close the Demat account.
Yes, you can convert your Demat holdings into physical form. You need to submit a Rematerialsation Request Form (RRF) through your DP in the same manner as Dematerialisation. Upon receipt of such a request from the DP, the R&TA of the company will issue share certificates to you. However, before the transfer of such shares, the same will have to be dematerialized as per the process.