Dematerialisation offers flexibility along with security and convenience. Holding share certificates in physical format carried risks like certificate forgeries, loss of important share certificates, and consequent delays in certificate transfers. Dematerialisation eliminates these hassles by allowing customers to convert their physical certificates into electronic format.
All you need to know about dematerialisation:
Dematerialisation is a process through which physical securities such as share certificates and other documents are converted into electronic format and held in a Demat Account.
A depository is responsible for holding the securities of a shareholder in electronic form. These securities could be in the form of bonds, government securities, and mutual fund units, which are held by a registered Depository Participant (DP). A DP is an agent of the depository providing depository services to traders and investors.
Currently, there are two depositories registered with SEBI and are licensed to operate in India:
Step 1: Choose a broker who can facilitate the purchase of the securities
Step 2: Make a payment to the broker who will then arrange for the payment to the clearing corporation on the pay-in day
Step 3: The securities are credited to the broker’s clearing account on the pay-out day
Step 4: The broker will give instructions to its Depository Participant (DP) to debit the clearing account and credit the same to your account
Step 5: You will receive shares into your account. In order to receive the credit, you will need to give ‘Receipt Instructions‘ to the DP if you did not give standing instructions during the opening of your account
Step 1: Choose a broker and sell the securities in a stock exchange linked to the NSDL (National Securities Depository Limited)
Step 2: The Depository Participant (DP) needs to be instructed to debit your account with the number of securities sold and credit the broker’s clearing account
Step 3: You need to send the delivery instruction to your Depository Participant (DP) using the delivery instruction slips
Step 4: The broker will give instructions to its DP for delivery to the clearing corporation before the pay-in day
Step 5: You will receive the payment from the broker for the sale of your securities
There is a wide range of benefits of dematerialisation of securities. Some of them are as follows: