#dematerialisation process

https://img.etimg.com/thumb/msid-124634487,width-1200,height-630,imgsize-33312,overlay-etmarkets/articleshow.jpg Markets regulator Sebi on Friday proposed measures to make it easier for investors to dematerialise physical shares and transfer them, especially those lodged before April 1, 2019. By addressing long-pending transfer issues and removing redundant steps in the current system, Sebi aims…

Many people invest in shares and other securities through online processes. They have many confidential items, including share certificates that are important for their trade and commercial activities. These documents should be stored as there is a lengthy procedure for applying for duplicate ones. The world has advanced in technology. Everything is going digital.

The dematerialisation process consists of the conversion of physical shares and securities to digital or electronic formats to smoothen the process of buying, selling, transferring, and holding stocks. It is cost-effective and safe. Two depositories are registered with the Securities and Exchange Board Of India (SEBI), namely Central Depository Services India Limited (CDSL), and National Securities Depository Limited (NSDL), to take control of these accounts and processes.

Why is it essential?

Keeping track of paper-based documents can be tedious and annoying. There are possibilities of them getting lost or destroyed. Any misplaced material may lead to the breakdown of the Indian Share Market and the businesses associated with it. Duplicate certificates are not easy to obtain since the process is lengthy and involves lots of time.

Shares that get dematerialised will receive their credits in the Demat account without causing the fear of loss in transit and other interest charges for loans associated with that account.

The process

The dematerialisation of securities includes many processes, most importantly, the availability of a Demat account. Without this account, trading is not possible. It has become mandatory for every trader and shareholder to have this account in India.

The steps to apply for a Demat account are as follows:

1. Select a depository participant (DP): Most of the brokerage and financial firms get referred to as depository participants.

2. Fill the account opening form: The applicant should fill the form for opening the account which includes necessary contact details.

3. Submit the documents: Documents such as address proof, bank account details, income proof, identity proof, and one passport-sized photograph must be submitted for verification. All the copies should get duly attested.

4. Sign the agreement: A standardised agreement containing all the rules and regulations, charges get paid, and the terms and conditions between the applicant and the depository participant should be signed.

5. Document verification: A staff member from the DP will verify all the documents submitted by the applicant.

6. Generation of login details: Once all the documents are verified, the Demat account number and ID gets generated. With the help of these details, applicants can access their Demat account online.

Shares and securities are the most popular commodities of investments. They help the invested capital to multiply with every rise in the market value. A person has to submit documents to invest in these commodities with an account to track all the invested shares and securities. They are an additional source of income, and this is the primary cause of their popularity. Zero balance can be maintained in bank accounts if people start investing in shares.

Many people do not know what is dematerialisation because they have never dealt with shares in the past. It is a process through which physical securities are converted into electronic format and kept in a Demat account. Interested investors can open an account with the depository participant (DP). The DP is responsible for holding all the securities of the shareholder like bonds, government securities, share certificates, and mutual fund units in electronic form.

Currently, only two depositories are registered with SEBI and have the license to operate in India:

§  NSDL (National Securities Depository Limited)

§  CDSL (Central Depository Services India Limited)

A detailed explanation of the process

The dematerialisation process is not possible without a Demat account. The investor has to shortlist the depository participants (DPs) for offering their services. After the account is opened, the investor or the registered owner submits a request to the depository participant. The dematerialisation request form (DRF) should be attached along with other share certificates. “Surrendered for dematerialisation” should be mentioned on each share certificate.

The DP verifies the details entered in the DRF, including the certificates. The process involves verification of the client’s signature on the DRF along with the specimen signature, comparison of names on the DRF and the certificates with the client’s account, paid-up status, distinctive numbers, and lots more. If the form and security count is placed in the correct order, the DP issues an acknowledgement slip to the client that is duly signed and stamped. In case the securities are misarranged, they are returned to the client.

The DP processes the request in one attempt to the company and the Registrars and Transfer Agents through the depository. The physical documents are destroyed after they are received in an arranged order. The confirmation of dematerialisation is sent to the depository. The credit of holding the shares will reflect in the investor’s account electronically.