For most new-age investors and traders dematerialisation of shares is something that happens naturally. You go online buy the shares and they automatically pop up in your demat account. But did you know the dematerialisation of shares is a new concept? Till a few years ago buying and selling shares came with physical certificates. Yes, you heard that right!
A share certificate is a prima facie evidence that shows a shareholder’s ownership of the shares of a company. For a long time, these physical certificates were the way shares were bought or sold, however, they came with the risk of being stolen, lost or even destroyed.
Apart from maintaining paper-based documents, another disadvantage people faced before the dematerialisation of shares was the time it took to transfer securities.
Thanks to the advancements that the fintech industry has witnessed over the last few years, the dematerialisation of shares has transformed the Indian share market. Through dematerialisation, physical shares are converted into an electronic form. This has not just significantly smoothened the way shares are bought and sold but also makes the process safe and cost-effective. Read on to know more.
Dematerialisation of Shares: The Process
Let’s see how it works:
Step 1: Find the right DP
The process of dematerialisation of shares begins when you open a Demat account with a Depository Participant (DP) of your choice. DPs are financial institutions or brokerage firms that act as intermediaries between you and the depository.
Step 2: Filing a Dematerialization Request
Next, you’ll need to fill out a Dematerialization Request Form (DRF) from your DP. Fill it out and submit it along with your physical share certificates.
Step 3: Processing the Paperwork
Your DP steps in here to handle the dematerialization request by forwarding your certificates to the respective company, registrar, and transfer agents. This ensures the process moves seamlessly.
Step 4: Verification of Documents
A representative from the DP will cross-check all submitted documents to ensure everything is in order.
Step 5: Approval and Digital Transformation
Once the necessary approvals are in place, the physical certificates are destroyed, and your dematerialized holdings are securely updated in your Demat account. Your unique Demat account number and ID will be generated. You can use these credentials to access and manage your Demat account online effortlessly.
Dematerialisation of Shares: The Benefits
Let us now take a look at the various benefits that you can expect when you choose to go ahead with the dematerialisation of shares:
1. Makes Easier to Manage Your Portfolio
When you have a demat account, buying and selling shares becomes very easy and convenient. You save yourself from the hassle of handling physical share certificates, as everything now becomes digital.
2. You Can Transact When You Want
With your phone or your laptop in your hands, you can carry out transactions, no matter where you are. Another added advantage of the dematerialisation of shares is that it makes securities highly liquid, allowing you to easily pledge them as collateral for loans. This flexibility adds a layer of financial agility to your portfolio.
3. Ironclad Security Provides Peace of Mind
Physical shares come with risks like theft, damage, or loss. With an Open Demat account, all these concerns vanish. It’s the safest way to manage your investments in a digital format.
4. You Get to Go Paper-Free
Demat accounts eliminate the need for paper. Whether it’s managing shares, equities, or debt instruments, everything stays digital. Companies save on administrative costs, and you contribute to a greener planet.
5. Tracking the Portfolio Becomes Simpler
In the age of smart devices, monitoring your portfolio’s performance can be done from anywhere in the world. This flexibility encourages better decision-making, helping you maximize your profits with timely trades.
6. It is Multipurpose
Your Demat lets you go beyond equities. It allows you to hold and trade debt instruments, mutual funds, government bonds, and ETFs. It’s your all-in-one solution for managing diverse investments effortlessly.
In Conclusion
If you are looking forward to making an entry into the stock market, dematerialisation of shares is something that you need to be well aware of. If you still have shares in physical form, get in touch with a reliable DP, and complete the dematerialisation process as early as possible.
