Dematerialisation is the process through which physical shares and securities are converted into electronic format. So, if a trader or an investor wants to dematerialise his physical securities such as share certificates, government securities, bonds, mutual fund units and other documents, he needs to have a demat account. Once the demat account is opened, the trader or investor surrenders his physical shares and in return gets electronic shares in his demat account.

A demat account has to be opened with a depository participant who is responsible for holding and maintaining shares and securities of the investors in the electronic format. To understand in simple words, you can conceive a depository participant as a ‘Bank’ for securities. Just like banks deal in handling funds, depositories deal in handling securities of the traders and investors. In India, there are two depositories registered with SEBI and have the license to operate – NSDL (National Securities Depository Ltd.) and CDSL (Central Depository Services Ltd.).

After understanding the basic dematerialisation meaning, let us know more about what is dematerialisation.

Why Dematerialisation Came Into Existence?

Before the concept of dematerialisation was introduced, trading in shares and securities was a lot of hassle. Traders and investors use to hold the share certificates in the physical format which was not only inconvenient but was also risky. There were risks like theft, robbery, damage, forgery and many others. Also, physical paperwork involved errors and unforeseen mishaps in the past. Keeping a track of transaction was very difficult. Moreover, share certificate transfer was also a major concern as it use to take months to transfer the certificate. In order to mitigate the risks associated with physical securities, the concept of dematerialisation was introduced in the Indian Financial Market. Dematerialisation eliminates all the above mentioned issues by allowing traders and investors to convert their physical certificates into electronic format. Moreover, it offered a lot of flexibility, ease, convenience and made the entire process of trading very quick.

Process of Dematerialisation

• First, you have to open a demat account for which you need to look for a Depository Participant that offers demat services. Depository Participant can be a bank, intermediary or a stock broker like Kotak Securities.
• Next, you need to fill in the account opening form and submit various documents like copy of Aadhaar card, PAN, other address proof (such as voter id, driving license, ration card, etc.), KYC form, crossed cheque and bank statements.
• You also have to fill in Dematerialisation Request Form and deposit it along with the share certificates which should have the words ‘Surrendered for Dematerialisation’ written on them.
• In the next step, the Depository Participant processes the request for conversion of physical securities into electronic form by sending the share certificates to the company, registrar and other transfer agents.
• After the request is approved, the physical share certificates will be destroyed and notification of confirmation will be sent to the Depository Participant.
• After successful completion of the above step, your account will be credited with the electronic holdings that you have.
• The entire process takes around a month or a half.

Conclusion

Dematerialisation is only possible if you have a demat account. Follow the link to know more on what is demat account and how to open one: Demat account.

If you want a hassle-free trading experience, open your demat account now and enjoy trading in a convenient and easier manner.

Sponsored post by Kotak Securities