What is Dematerialization of Securities


What is Dematerialization of Securities

Dematerialization is the process by which a person can convert their physical shares and securities into digital or electronic format and held in Demat Account. The basic requirement of Dematerialization is to smoothen the process of buying, selling, transferring and holding shares and also about making it cost-effective.

Holding share certificate in physical format carried some risks like forgeries, loss of important share certificates, and delay in certificate transfers. Dematerialization eliminates all these hassles by allowing customers to convert their physical shares

A depository is responsible to hold the securities of shareholder in an electronic format. These securities could be in the form of bonds, government securities, and mutual fund and held by a registered Depository Participant (DP).

There are two depositories registered with SEBI and are licensed to operate in India:
1. NSDL (National Securities Depository Ltd.)
2. CDSL (Central Depository Services (India) Ltd.)

Process of Dematerialization

1. Dematerialization process starts with opening demat opening. To open your demat account, you need to shortlists a Depository Participant (DP) that offers demat services.
2. Generate the dematerialization request in order to convert the physical shares into electronic form. Dematerialization form is available with the Depository Participant (DP).
3. The DP will process this request along with the share certificates and simultaneously to the registrar and transfer agents through depository.
4. After the approval of application, all the shares’ certificates will be destroyed and confirmation of dematerialization of shares will be sent to depository.
5. The depository then will confirm the dematerialization request of shares to the DP and then your shares will be credited in your demat account which can be seen electronically.

If you do not have an account and wish to do trading then visit the following links to open your account.

To open your account with Alice Blue

To open your account with Angel Broking

To open your account with Zerodha

Benefits of dematerialization

There are several benefits that dematerialization of securities offers to its customers.
1. Convenient way to manage shares
2. Made transaction form anywhere
3. Minimize the risk of theft, loss, forgery or damages
4. You can security in odd lots
5. No Paperwork
6. Reduce time to do transactions

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