Dematerialization of shares is now mandatory and if you hold any physical certificates, these must be converted to an electronic form at the earliest. The law will no longer allow the transfer of physical securities with only the exception of certificates that are held under a will.
If you want to convert the physical shares to an electronic form, you will need to follow the below mentioned simple steps:
- Opening a demat account
The electronic shares are held in a dematerialization account that may be opened with a registered Depository Participant (DP). A demat account is similar to a bank account and is used to hold your investments electronically. Here is how you may open a dematerialization account:
- Choose a registered DP
- Complete the account opening form
- Attach copies of the Know-Your-Customer (KYC) documents with the application form
- Sign the demat agreement that includes the terms and conditions along with a schedule for various fees and charges
- An in-person verification is done by the service provider’s representative
- On completing the procedure, you will receive the client ID and account number, which allows you to commence trading in equities
- Convert the physical certificates to the dematerialized form
The process for the dematerialization of shares is detailed as below:
- Procure the Dematerialization Request Form (DRF) from the DP
- Complete the form and submit it to the DP along with the physical certificate; every certificate must have ’surrendered for dematerialization’ written on it
- The DP verifies the DRF and checks the authenticity of the share certificates
- On completing the verification and authentication, the physical certificates are converted to an electronic form and transferred to your dematerialization account
- Dispose of the physical certificates
Once you convert shares to an electronic form, the physical certificates become redundant and need to be destroyed. An equivalent number of shares are credited to your dematerialized account. Therefore, you no longer need to preserve the physical certificates.
With the dematerialized shares, you may easily buy and sell securities within moments, which was not possible when shares were held as physical certificates. The physical holdings also had certain inherent risks, which are now eliminated with the electronically held shares. Some of these risks include:
- Physical certificates required safe and secure storage. Moreover, there were the risks of damage, theft, or loss of these certificates. If you held the shares for a long period of time, there was also the risk of wear and tear of the certificates.
- The entire procedure to buy, sell, and transfer physical shares was long and cumbersome. It took several days and involved a large number of steps. In comparison, transacting in dematerialized shares is more convenient, less tedious, and simple. The entire procedure may be completed within moments, which makes it more efficient.
- Transfer of physical shares entailed the payment of certain stamp duty charges, which increased the transaction costs. Dealing in demat shares do not incur any stamp duty charges, which makes the transaction affordable and cost-efficient.
If you still hold physical certificates, open a dematerialization account today and convert your shares to an electronic form.