Are you looking to convert your physical shares to demat but unsure where to start? Well, you’ve come to the right place! Did you know that according to a report issued by SEBI in April 2019, your request to transfer shares will not be processed unless they are in dematerialised form? Don’t worry; converting your physical shares into demat form is a relatively straightforward process, and we are here to guide you through it step-by-step.
What is a Demat Account?
The introduction of Demat accounts by the Securities and Exchange Board of India (SEBI) in 1996 revolutionized investing by digitizing the process. A Demat account is an essential aspect of this digital revolution.
According to the data, the number of demat accounts increased to 11 crore in January 2023 from 8.4 crore in January 2022.
‘ Demat’ means dematerialization, which involves converting physical securities into electronic form. With a Demat account, investors can hold, transfer, and transact securities without the inconvenience of dealing with physical securities. This has made trading safer, quicker, and more efficient for storing deposits and executing trades.
What is the Dematerialization process ?
Dematerialization converts physical securities, such as physical share certificates, into electronic form stored in a Demat account. The National Securities and Exchange Board of India (SEBI) made it mandatory to dematerialize securities to streamline trading and make it more efficient.
Converting physical shares into Demat form starts with opening a Demat account with a depository participant (DP). The DP acts as an intermediary between the investor and the depository, a central securities depository holding electronic securities.
Once the investor has opened a Demat account, they must submit a Dematerialization Request Form (DRF) to their DP and physical share certificates. The DP will then forward the DRF and physical certificates to the company’s registrar and share transfer agent whose shares are being dematerialized.
The registrar and share transfer agent will verify the details on the physical share certificates with their records and then cancel the physical certificates. The DP will then credit the electronic shares to the investor’s Demat account. This whole process can take up to 15 days.
After the shares have been dematerialized, investors can sell or transfer your shares using their Demat account. The Demat account provides a secure and convenient manner to hold and trade securities without the risks and hassles associated with physical share certificates.
What are the Required Documents for converting Physical Shares to Demat?
Before dematerializing your physical share certificates, gathering all the necessary documents is essential. Below are the required documents for dematerializing your physical share certificates:
● Physical share certificates: You will need the original physical share certificates you want to dematerialize. Ensure that the credentials are valid and not damaged or torn.
● Dematerialization Request Form (DRF): This form must be filled out and submitted to your depository participant (DP) to initiate the dematerialization process. You can get this form from your DP or download it from their website.
● Know Your Customer (KYC) documents: You will need to submit a copy of your KYC documents, which includes your PAN card, Aadhaar card, and a canceled cheque from your bank account.
● Signature proof: You must provide a signature proof, which can be a copy of your passport, PAN card, or driving license.
● Power of Attorney (POA): If you cannot visit the DP’s office to submit the DRF, you must provide a POA authorizing someone else to act on your behalf.
● Please submit documentation as proof of your residency, including registered lease agreements, driver’s licenses, passports, landline telephone bills, electricity bills, apartment maintenance bills (if applicable), insurance copies, and gas bills.
● Additionally, your bank account passbook or account statement, which must not be older than three months, will serve as proof of your bank account.
It is vital to ensure all the documents are in order and copies are duly attested by a gazetted officer or notary public. This will help in the smooth processing of your dematerialization request. Once you have all the required documents, you can open a Demat account and initiate the dematerialization process.
How to Convert Physical Shares to Demat?
If you are still holding physical share certificates, it’s high time to convert them into demat form. The procedure of converting physical shares into demat is crucial as the national securities and exchange board of India (SEBI) mandated that the request for the transfer of shares will not be processed unless they are in dematerialised form. This blog section will take you through converting your physical shares into demat form.
To convert physical shares to Demat online, you must follow the dematerialization process developed by India’s Securities and Exchange Board. This process involves two steps, starting with opening a Demat account, then submitting a request for dematerialization of shares.
Step 1: Open a Demat Account
To open a Demat and trading account quickly and easily, follow these steps:
● Go to the website of your preferred DP.
● Click on the “Open a Demat and Trading Account” option.
● Fill in the application form.
● Upload scanned copies of all the required KYC documentation.
● Sign the agreement with the DP and the charges. This agreement outlines the responsibilities and obligations of the account holder and the depository participant, so it is essential to read it thoroughly before signing.
The DP will process your application after receiving all the relevant documents.Once your Demat and trading account application is approved, you will receive a unique user ID, password, and a Demat account number to access your trading account.
Step 2: Submit a Request for Dematerialization of Shares
After opening a Demat account, you can follow these steps to request the dematerialization of your physical shares:
● Contact your DP for a Dematerialization Request Form (DRF).
● Please fill up the DRF with all the required details and sign it. Then, submit the filled form and physical share certificates to your DP. It is essential to mention “Surrendered for Dematerialization” on each physical share certificate.
● After obtaining the DRF and the physical share certificates, your DP will process your dematerialization request.
● The DP will then send your dematerialization proposal to the Registrar and Share Transfer Agent (RTA) appointed by the relevant company.
Once the dematerialization request is consented to, your physical share certificates will be destroyed, and your Demat account will be credited with the appropriate number of shares..
What is the Difference between Dematerialization and Rematerialisation?
Regarding securities, the terms Dematerialization and Rematerialisation may sound confusing, but they are crucial to understanding. Dematerialization converts physical form of shares into electronic form, while Rematerialization is the reverse process of converting electronic shares into physical certificates.
While Demat shares are secure and easy to trade, rematerialized shares cannot be traded and are illiquid. The key differences between the two include unique identification numbers, the process of transactions, maintenance charges, and the level of security. As an investor, it is essential to know the difference between these two processes to make informed decisions.
Conclusion
In conclusion, the process of converting physical shares into dematerialized form has become mandatory by the Securities and Exchange Board of India (SEBI) for efficient and secure securities trading. To ensure a smooth dematerialization process, registering your physical shares with SEBI and following the necessary steps is essential. The conversion of physical shares into demat form is carried out by a share transfer agent who converts your physical shares into electronic or dematerialized form. Therefore, opening a Demat account with a depository participant (DP) is essential to learn how to convert physical shares to demat. The DP is registered with SEBI to provide Demat services. The conversion of physical shares into demat form is a one-time process that enables you to trade, transfer, and store your securities much more efficiently and securely. So, converting your physical shares into demat form is recommended to make the most of your investments.
