The stock market has grown to provide newer investors with features and simplicity of trading. There was a period when the stock market used an open outcry system, which required investors to be present physically at stock exchanges to purchase and sell shares.
The transactions were using actual share certificates that served as proof of ownership. However, the method became obsolete with the development of internet dealing and convert shares to Demat trading platforms.
What Exactly Is Dematerialization?
The process of transforming a company’s physical certificate into an online format is known as the dematerialization of securities. These Demat securities are then kept online with a deposit where you create an account. Share dematerialization is essential in today’s stock trading market to sell or move your holdings to another account.
What Is The Purpose Of Converting Physical Shares To Demat?
According to the requirements of the union government, individuals can no longer trade in actual share certificates. The investor must convert the share certificates into a demat or electronic form. That will make it easier for investors to acquire, sell, and transfer a company’s shares.
How To Convert Physical Shares To Demat Shares
Create a Demat Account
You must first create a trading platform with a Depository Participant before you can begin the method of transforming your physical shares to Demat format (DP).
- Go to DP’s website.
- Fill out the account registration form.
- Fill out the KYC and account opening forms, and attach the necessary scanned documents.
- Complete and submit the form after considering the applicable costs and terms/conditions.
- The DP will submit your application once all the needed documents have been received.
Make a dematerialization request.
To use your account, you must –
- Get in touch with your DP to obtain the Dematerialization Application Form. Once received, fill up the data and submit them to your DP together with your certificates.
- Your request will be handled after your DP gets the DRF and the submitted physical share certificates.
- Your DP will then forward this application to the Registrar and Share Transfer Agent. RTAs review the papers and continue with the request.
- Finally, after the demat request is approved, your physical share papers will be destroyed, and your Demat profile will be paid with the correct number of shares.
What Are The Advantages Of Switching Physical Shares To Electronic Shares?
- Security –
A dematerialization profile also called a Demat account, is the most dependable and secure way to perform electronic transactions. All the hazards connected with actual stock ownership, such as theft, vandalism, and loss of certificates, are avoided.
- Affordability –
You may do transactions online using a Demat account. You are not required to be physically present in the broker’s office to execute a transaction. Furthermore, the client may control their Demat account using a computer or a mobile device. To become the rightful owner of your shares, you can also transfer your physical assets to electronic form.
- Make use of the financial facilities –
You can borrow money against your dematerialized assets using a Demat account. Stocks and assets held in a Demat profile may be used as security to secure a loan.
- Nominations Service –
If you cannot conduct transactions in a Demat account, you can choose someone to run your account on your behalf by completing the authority of attorney form. As a result, numerous persons can have a Demat account. If you wish to create a Demat profile for at least one person, you must do so when you open the profile.
As you can see from the previous description, the method used to convert shares to demat has simplified the formerly complicated stock trading process. While dematerialization may appear to be a challenging operation, it requires little user engagement. The entire conversion of physical certificates to Demat type takes 2 to 3 weeks.