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In 2019, the Securities and Exchange Board of India (SEBI) implemented a plan to bring transparency to the capital markets by mandating that shares can be transferred in the stock markets electronically. This implies that you may continue to hold your physical shares; however, you cannot transfer their ownership. To transfer or trade your paper shares, you must convert them into the Dematerialised form using a Demat account. The process involves converting your physical paper shares into an electronic format. This article presents a study on how to convert physical shares into Demat.
Follow these steps to understand how to Demat physical shares:
Individuals must submit a Dematerialisation Request Form (DRF) to start the conversion process of paper-based securities into the Dematerialised form. Let us elaborate on the process.
Step 1: Apply for a Demat account
The first step to convert physical shares to Demat requires you to open a Demat account. You will be required to submit some primary KYC documents, such as identity and address proof, along with your photo and account opening form
Step 2: Fill out the Request Form
Contact your Depository participant and request a Dematerialisation request form (DRF). Submit this filled-out form to your Depository participant.
Step 3: Surrender your paper certificates
Submit your physical share certificates and write “surrendered for Dematerialisation” on them along with the DRF.
Step 4: Registrar and Transfer Agent
After submitting your DRF form and paper share certificates, your depository participant will notify the Registrar and Transfer (R&T) agent electronically. Additionally, a Dematerialisation registration number will be generated for your application form, which will go into your DRF and be sent to the T&R agent along with your physical share certificates.
Step 5: Verification and completion
The T&R agent will run a validity check on your documents. Transferring physical shares into Demat form typically takes around two to three weeks. Once your DRF is successfully verified along with the physical shares, you will receive an electronic request for converting your physical shares to Demat form. The Dematerialised shares are then credited to your Demat account.
Convenience in Transactions: A demat account simplifies handling physical share certificates, making transactions easier by enabling the conversion process. This allows investors to learn how to convert physical shares into demat form, reducing the need for physical meetings with brokers.
Seamless Fund Transfer: Linking a demat account to a bank account facilitates seamless fund transfers, which eliminates the need for cheques. Understanding how to convert physical shares into demat supports streamlined financial management and improved convenience.
Nominee Access: By knowing how to dematerialize physical shares, investors can enable nominees to operate the demat account in the owner’s absence, ensuring continuity in managing investments.
Eco-Friendly and Paperless: Demat accounts eliminate the need for maintaining physical share certificates, offering an eco-friendly and efficient method for those who opt for digital holdings, avoiding the risks of lost or damaged documents.
Loan Collateral Opportunities: Using a demat account for physical share certificates opens up options to use holdings as collateral, adding financial flexibility and security.
Portfolio Tracking Made Easy: Converting physical share certificates into demat form enhances portfolio monitoring, allowing investors to track investments anytime, thus fostering better-informed decision-making.
Simplified Receipt of Corporate Benefits: Corporate benefits, such as dividends and interest payments, are directly credited into a demat account, simplifying the manual processes often needed with physical share certificates, and ensuring efficient updates.
Supports Diverse Investment Types: A demat account provides a versatile platform for managing various investments, including mutual funds, bonds, and ETFs, making it a comprehensive solution for diversified portfolios.
The process of knowing how to convert physical shares into demat form offers a secure, convenient, and efficient way to manage investments in today’s digital landscape, reducing the risks associated with paper-based holdings.
Aspect | Dematerialisation | Re-materialisation |
Conversion Process | Conversion of physical share certificate into digital form. | Conversion of digital holdings back into a physical share certificate. |
Cost and Fees | Demat accounts may incur annual maintenance and transaction fees. | Physical certificates do not have maintenance fees. |
Security Risk | Digital holdings lower risks of misplacement or forgery. | Physical holdings carry risks like fraud, theft, and misplacement. |
Identification Number | Demat accounts do not assign unique numbers to each security. | Physical certificates include unique identification numbers. |
Transaction Method | All transactions are electronic. | Transactions are completed manually. |
Maintenance Responsibility | Depository Participants (DPs) such as NSDL and CDSL handle demat maintenance. | Issuing companies manage physical certificate upkeep. |
Process Complexity | Converting physical share certificate to demat is straightforward. | Re-materialisation requires more time and expertise. |
Each process has specific features suited for different investor needs.
You may continue to trade your shares once converted into Dematerialised form. The process involving how to convert physical shares to Demat is straightforward and saves you from hassles such as storing your share certificates. However, you must ensure that your physical shares are still listed on the stock exchange. If your physical shares get delisted from the stock exchange, these certificates lose all their value.
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