Dematerialisation: It is the conversion of the physical share and debenture certificates to an electronic form. Managing investment in shares and securities becomes much easier when all physical certificates are present in the dematerialised form. It reduces the chances of forgery and fraud that had become rampant when electronic entries were unavailable. In the case of dematerialisation, the electronic records are stored at a depository. In India, the National Securities Depository Limited (NSDL) and Central Depository Services (India) Ltd (CDSL) are the authorized depositories.
Rematerialisation: Any investor who has already converted the securities and debenture certificates to electronic formats has the option of changing them to physical form once again. People opt for rematerialisation to avoid paying for the maintenance charge of a Demat account that has only 1 or 2 shares. It is the process of converting all securities in the electronic form to physical certificates. You will need to fill out a Remat Request Form (RRF) and approach the Depository Participant (DP) with it.
|Meaning||The transformation of physical certificates of shares and debentures to electronic form||Conversion of the electronic records of the share to paper (physical) form|
|Identification of Shares||Dematerialised shares do not have a distinct number||They possess distinct numbers issued by the RTA|
|Transaction mode||All transactions take place in electronic formats only||All transactions post-rematerialisation take place physically|
|Account maintenance authority||The Depository participant (NSDL or CDSL) is in charge of the account maintenance||The company is in charge of account maintenance|
|Maintenance costs||The annual charges for maintenance vary between Rs. 500 and Rs. 1000||No maintenance charges are necessary for physical certificates|
|Security||Threats to the digital form are low||Threat of forgery and fraud to physical paperwork is higher|
|Difficulty||Dematerialisation is an easy process. It is a ubiquitous part of share trading; almost every investor has experienced once||Rematerialisation is a complex process that takes a long time. It is difficult and may require expert assistance|
Dematerialisation and rematerialisation processes are the diametric opposites of each other. In simple words, rematerialisation reverses the results of dematerialisation.
Step by step guide for dematerialisation of shares and securities
To convert any physical share or debenture certificate into an electronic form, you will need a Dematerialisation Request Form (DRF).
- It is an easy and comprehensive process that begins with the Demat account. You need a Depository Participant (DP) that offers Demat services
- Fill in the DRF and submit it with the share certificates. Mention “Surrendered for Dematerialisation” on each certificate
- The DP should pass the request to the depository, registrars and transfer agents, along with the share certificates
- The registrar informs the DP of the process status
- Upon confirmation, the investor’s account reflects the credit of shares
- Electronic share transfer can take between 15 to 30 days
Step by step guide for rematerialisation of shares and securities
To get the dematerialised securities in the traditional form once again, you need to get the Remat Request Form (RRF). Here is a brief account of the rematerialisation process –
- The client needs to submit the RRF to the DP
- The DP approaches the depository with the form. The depository forwards the request to the registrar
- The DP sends the forms to the registrar
- The registrar prints new physical certificates and sends them over to the investor
- Once the registrar confirms the Remat request to the depository, the investor receives the new certificates in the account with the DP
- Rematerialisation can take up to 30 days
How to sell and buy dematerialised securities?
The process of buying and selling dematerialised securities is, in fact, identical to the procedure of buying and selling physical securities. Here is a brief account of the buying and selling processes
Buying dematerialised securities
- Find a reliable and experienced broker for the transaction
- The broker receives the securities in his account on the day of the purchase
- The broker approaches the DP for debiting his account and crediting the investor’s account
- The investor needs to forward a receipt instruction to the DP for receiving the credit, in case no clear instruction is given during opening of the account
Selling dematerialised securities
- You can choose to sell through a broker at any of the stock exchanges connected to NSDL
- The DP should receive the instructions to debit the BO account and credit the broker’s account
- The broker needs to give the instructions to the DP for delivery to the clearing corporation through the instruction slips
- The broker receives payment from the stock exchange, while the seller gets the proceeds from the sale of the securities
Dematerialisation has made transactions easier and smoother than before. It has mitigated the risks of fraud and forgery while opening up the doors of the share market to a number of small investors and new traders.