Dematerialisation is the process by which physical shares are converted and maintained in an electronic format.
The process of dematerialisation is captured in the following steps:
1. The client opens a demat with a depository participant (DP) and surrenders his/her physical shares with a request to dematerialise them.
2. The DP intimates the request to the concerned Depository (NSDL or CSDL) and sends the securities to the registrar of the Issuer Company.
3. The Depository in turn forwards the request to the issuer.
4. The registrar will complete the dematerialisation process and register the shares in the name of the Depository (with the investor being the beneficial owner of the securities.)
5. The Depository will credit the shares in the demat account of the client.
Who is a depository?
As defined by SEBI, 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. It also provides services related to transactions in securities.
The advantages of dematerialisation of shares.
The following are the benefits of dematerialisation:
1. Easy safe-keep of securities. No fear of loss of physical shares certificates.
2. Easy transfer of shares. No paper work involved.
3. Elimination of stamp duty charges on transfer of shares.
4. Automatic credit of securities on account of corporate actions (bonus, split etc.)