All about the Process of Dematerialization: In this article, you will learn about the process of Dematerialisation. You will learn how to fill the physical certificate and how to fill the Dematerialisation Request Form. In the earlier years, when investors used to invest, they used to take physical possession of shares and securities. Hence, they used to have a physical certificate showing their ownership.
However, many risks are associated with physical certificates. Some of the risks associated with the physical certificates are theft, forgery, wrong delivery, and chances of theft. It was to solve such problems when the concept of Dematerialisation was introduced.
What is Dematerialisation?
Dematerialisation is a process when the physical share certificates are converted to an electric form. It is a process to mitigate the risks of theft and forgery. After the shares are converted to an electric setup, the person should get the shares registered and transferred through the internet. This is an essential step in the process of Dematerialisation.
If a person wants to trade the stocks in the online form, they will need to open a Demat account. Without a Demat account, a person cannot continue trading stocks in the dematerialisation process. Dematerialisation offers an additional benefit of flexibility along with benefits like security and convenience. After you dematerialise your shares, you can easily buy securities in odd lots and buy single security. It is a process that can help you digitalise all your physical share certificates. Through a Demat account, you will know that all your shares are in one place.
What is the Process of Dematerialisation?
When you read the term dematerialisation, you would think it’s a lengthy and challenging process, but it’s not. The method of Dematerialisation is simple and easy. Transferring shares to an electronic form is a simple process. Below, you will find a step by step process to dematerialise your shares. When you follow this process, you will be able to dematerialise your claims without any issues. Here’s a simple guide to dematerialise your shares:
You need to Shortlisting of a Depository Participant
A Depository Participant is an important person. He is the intermediary between the depository and an investor. You won’t be able to start the dematerialisation process without the help of a depository participant. The list of the depository participants is available on the website of Central Depository Services Limited (CDSL) and National Securities Depository Limited (NSDL). You can select a depository participant easily from these websites. It’s a hassle free process because these websites will give you the correct information.
Step one of dematerialising is to open an account with a depository participant offering Demat account services. After opening a Demat account, an investor doesn’t need to open a separate trading account if he or she wants to trade in debts, bonds, or any other financial instrument. Instead, they can use the Demat account for all purposes.
You need to Fill the Dematerialisation Request Form
The next step of dematerialising your share certificates is to dematerialisation request form. You will find the Dematerialisation Request Form (DRF) will be available with the depository participant. After you get the form, you will have to fill the form and submit the form to the depository participant. The next thing you need to do is submit your physical share certificates. When you submit the Dematerialisation Request Form to the depository participant, you need to surrender their physical shares certificates. One of the most important things you need to remember is that each share should have ‘Surrendered for Dematerialisation’. Therefore, you need to submit both the Dematerialisation Request Form and physical share certificates.
The Processing of the Dematerialisation Form Request
The next step of the dematerialising of the shares is to submit the DRF and physical share certificate. The application needs to be processed by the Depository Participant. Your physical share certificates will be forwarded to the registrar of the company that issued the shares. The registrar will confirm your dematerialisation request. If there are problems in the form or any information is wrong, your dematerialisation process will be stopped till you make the corrections and re-send the document. Therefore, you need to make sure that all the information you put in the Dematerialisation Form Request is correct, and there will be no chance of the form being rejected.
The Approval of the Request
The last step in the process of Dematerialisation of the share certificate is the approval of the Dematerialisation Form Request. After the registrar approves your DFR, he will inform your depository participant that the process of Dematerialisation is complete. All the surrendered physical share certificates are going to be destroyed. In the Demat account of the investor, he will see a credit of the shares. It takes fifteen to thirty days after submitting the dematerialisation request for the shares to get transferred electronically. The entire process of Dematerialisation of shares takes up to a month or two. After the procedure is done, you will be able to use your Demat account to continue investing in shares.
There are several reasons for the advantages of Dematerialisation. One of the advantages of Dematerialisation is that it minimises the paperwork associated with the ownership, transfer, and trading of the securities. Another advantage of the shares’ Dematerialisation is that it facilitates quicker transactions and offers convenience. You can do transactions whenever you need to without worrying about anything else. Dematerialisation makes the process of marketing quick and straightforward.
You should know that another advantage of the Dematerialisation of shares is that investors don’t have to pay stamp duty on the digital shares. Once the shares are converted to the electronic form, you don’t need to pay any extra fee like the stamp duty. Hence, with the additional costs you were paying with the physical share certificates, you will no longer need to pay it. When you evaluate the pros and cons of Dematerialisation of the physical shares, you will see that the pros weigh out the cons. Therefore, proving that you should dematerialise your shares. The process of Dematerialisation brings growth in the Indian market.