Dematerialization is the process by which physical certificates of securities are converted into securities in electronic form by way of credit in investor’s demat account held with a Depository. Dematerialization is change in form of holding from physical to electronic, it does not result into change of ownership.
A depository is an organisation which holds securities (like shares, debentures, bonds, government securities, mutual fund units etc.) of investors in electronic form at the request of the investors through a registered Depository Participant.
At present two Depositories viz. National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) are registered with SEBI.
A Company willing to admit its securities with Depositories must appoint Registrar and Transfer Agent (RTA) to manage the share transfer facility.
Public financial institutions, scheduled commercial banks, foreign banks operating in India with the approval of the Reserve Bank of India, state financial corporations, custodians, stock-brokers, clearing corporations /clearing houses, NBFCs and Registrar to an Issue or Share Transfer Agent complying with the requirements prescribed by SEBI can be registered as DP.
Advantages of Dematerialization
● Elimination of risks associated with physical certificates such as bad delivery, fake securities, etc.; ● Reduction in paperwork involved in transfer of securities; ● A safe and convenient way to hold securities; ● Immediate transfer of securities; ● Reduction in transaction cost; ● Change in address recorded with DP gets registered electronically with all companies in which investor holds securities, eliminating the need to correspond with each of them separately; ● Automatic credit of shares in demat account, arising out of split / consolidation / merger etc; ● No odd lot problem, even one share can be traded;
Process for Dematerialization
● Shareholder holding securities in physical form has to submit duly filled and signed demat request form (DRF) or Dematerialization request form to his DP. ● DP will verify the details and setup demat request in the system. The DP will then deface and mutilate the certificate and send the same along with the DRF to Issuer/ RTA. ● On confirmation by the Issuer/ RTA, the shareholder’s account will be credited with the number of securities dematerialized.
1. Is it possible to change electronic holdings back into physical certificates?
Yes, it is possible through a process known as rematerialization. To revert securities to physical form, individuals need to complete the Remat Request Form (RRF) and request their Depository Participant (DP) for the rematerialization of their securities account balances.
2. Is it possible to dematerialize odd lot shares?
Absolutely, even odd lot share certificates can undergo the dematerialization process.
3. How long does dematerialization take?
It usually takes about 30 days. If it exceeds this period, contact your DP. If they can't assist, reach out to the Investor Complaint Cell at NSDL or CDSL.
4. What does ISIN stand for?
ISIN, which stands for International Securities Identification Number, is a distinct alphanumeric identifier consisting of 12 characters, assigned to a security (e.g., INE383C01018). It's important to note that securities such as fully paid-up equity, partly paid-up equity, and equity with varying voting or dividend rights, issued by the same entity, will each possess unique ISINs.