All You Need To Know About Dematerialization Of Shares

Since the introduction of Demat accounts and electronic share trading in India, the ownership of physical share certificates has steadily declined. The Securities and Exchange Board of India (SEBI) has even mandated that companies issue shares only in Dematerialized form and not as physical share certificates. You are probably asking yourself now, 'What is Dematerialization?', are not you? This is an important concept to be aware of, especially if you want to trade effectively in the lucrative stock market today. Since all the functions of trading and owning securities are happening online with the help of powerful portals and apps, you should be familiar with the concepts so that you know how to use the trading and investing world to your advantage. All investors trade and invest with the aim of making a profit, so it is best that you learn about all aspects of trading and investing in stocks. Read on to learn all about the concept of Dematerializing stocks.


What is Dematerialization?

The process of converting a company's physical share certificates into an electronic form is commonly referred to as the Dematerialization of shares. These Dematerialized shares are then held in an online Demat account that you open with a custodian. In the current context of share trading, maximizing shares is mandatory to sell or transfer your shares to another account.


In the past, shares were held in physical form, which has been a challenge over time. Paper is fraying, and as the world has become online in most areas of life, why not in the area of investments and stock markets? Dematerialization has made investing easy, and you can easily open a Demat account with a bank or a good broker. Since all accounts are kept electronically, Demat accounts are linked to bank accounts and trading accounts so that trading transactions (buying and selling of stocks) can be done smoothly and seamlessly. Since investments in stocks are mainly made when lucrative opportunities arise, Demat accounts serve the purpose of quick trading with common trading accounts and bank accounts.


Advantages of Dematerialization of shares

Now that you know the answer to the question 'What is Dematerialization?", let us take a quick look at some of the benefits of Dematerializing stocks.


1. Increased security:

Since Dematerialization converts physical shares into electronic shares, you no longer have to worry about damage, mutilation, loss or theft of your share certificates. You can safely store all your shares in a single Demat account that you can access from almost anywhere in the world.


2. Enhanced security:

When physical stock certificates were used, there were many cases of forgery, fraud, and duplication. With Dematerialized shares, none of these incidents are possible anymore.


3. Facilitation of instant transfer:

With physical share certificates, transferring shares from one person to another would normally take days. But thanks to the Dematerialization of shares, the transfer of shares is now exceptionally easy and almost instantaneous.


4. Quick and easy transactions:

The entire process of opening Demat accounts for stock ownership has made the lives of investors and traders alike very easy and convenient. From keeping stocks safely in one place and getting a consolidated statement of all the securities you hold to the convenience of trading online through Demat accounts, investing is easy. Today, everyone from students to retirees invests in stocks through a simple Demat account linked to a trading account. You can operate both online and from anywhere, even when you are on vacation. The simplicity of trading with a Demat account offers tremendous opportunities to profit from price changes in the stock market and subsequently earn good returns.


The process of Dematerialization of securities


  • The process of the Dematerialization of stocks is quite simple and easy to understand. Moreover, it only takes a few days to complete. Here is a brief explanation of the process of the Dematerialized of shares.


  • First, you need to open a Demat account with a depository through a depository participant (DP). Usually, the stockbroker where you have a trading account also acts as DP.


  •  Once you have opened a Demat account, you'll need to submit a properly completed Dematerialization Request Form (DRF) to your DP along with the physical share certificates you hold.


  •  If you own shares in more than one company, you must submit a duly completed DRF for each company together with the relevant share certificates.


  •  Upon receipt of the DRF, your DP will review both the form and the securities to make sure everything is in order.


  • Once the DP is satisfied with your application, you will receive a Dematerialization Request Number (DRN) as confirmation.


  •  The DP will then forward your application to the company's Registrar and Transfer Agent (RTA).



  • And finally, the now Dematerialized shares are credited to your Demat account, which you can then either sell or transfer to other accounts.


Dematerialized


Location: Delhi, India

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