ABOUT DEMAT
A Demat account ensures a simple, seamless, paperless, and genuine trading and investing. However, to maintain the genuineness of the process, you need to provide certain documents for opening a demat account.
OPEN A DEMAT ACCOUNT
Concepts and Procedures
1)SAFETY –Possessing shares in their paper format carries a lot of risks like loss, misplacing them, damage to the certificates, etc. Dematerialization of shares eliminates the risk of loss and damage to the securities. The paper certificates also had high incidences of forgery and theft. As the holdings are now in an electronic format, it has reduced the threat of forgery and theft.
2)ACCESSIBILITY – A demat account makes equity trading and your shares accessible. You can trade in securities, view your holdings, transaction history, etc. at the click of a button. It also makes managing your details easy. You can make changes to your address, linked phone number, linked bank account, and such other account- related changes for every company stock all from your demat account.
3)EASE OF TRADING – Earlier, paper certificates had to be sent to the Company or the Registrar and Transfer authority to change the ownership of shares, which resulted in delays, additional costs and loss of certificates. With demat accounts; transfer of shares has become easier. Trading in shares, buying, storing, selling online has become seamless and streamlined.
4)COST-EFFECTIVE – Stamp duty applicable on transfer of physical shares, which was a cumbersome process for investors. Dematerialization of shares has eliminated the stamp duty and reduced all other transactional costs.
5)NUMBER OF SHARES – Earlier, there were multiple restrictions on the selling of shares. Shareholders could not sell shares in odd lots. Demat Accounts has eliminated those restrictions.
6)VARIETY OF INVESTMENTS - With the diversification of investment options, a demat account can store mutual funds, bonds, government securities, Exchange Traded Funds (ETF), etc.
Securities can be transferred from one demat account to any other financial institution at no additional cost. The demat account holder should submit the form to the respective financial institution. In case of joint accounts or corporate accounts, all authorized signatories have to sign the form. A stamped and signed copy of the Client Master Report, available with the new depository has to be submitted. The names and details of all the account holders will not and should not change after the transfer.
A depository is a central entity where the stocks, shares and other financial securities are stored in an electronic or dematerialized format. It facilitates buying and selling of securities online for investors while maintaining comprehensive data of the holdings.
Depository Participants (DP) are authorized links between the Depositories and investors. It can be a bank or a brokerage firm or any financial institution which is registered with the SEBI as a facilitator of trade in equity investments. They provide the facility of demat account to investors.
In India, there are two Central Depositories – the National Securities Depositories Limited (NSDL), promoted by the National Stock Exchange (NSE) and the Central Depositories Services Limited (CDSL), promoted by the Bombay Stock Exchange (BSE), through which the authorized DPs can hold and manage financial securities.
Dematerialization is the conversion of shares in their paper format to electronic format.
The Securities and Exchange Board of India (SEBI) is the regulatory authority for equity investments in India. It has taken several steps to ensure that the dematerialization of shares provides a safe and secure trading experience to investors.
The responsibility of holding all the shares in their dematerialized form is entrusted to the central depositories – the NSDL and the CDSL.
Dematerialization is the conversion of shares in their paper format to electronic format.
The Securities and Exchange Board of India (SEBI) is the regulatory authority for equity investments in India. It has taken several steps to ensure that the dematerialization of shares provides a safe and secure trading experience to investors.
The responsibility of holding all the shares in their dematerialized form is entrusted to the central depositories – the NSDL and the CDSL.
Submit a Demat Request Form (DRF) along with share certificates defaced with "Surrendered for Dematerialization" to the DP.
The DP will enter the certificate details in the system to mark them for demat and send the information to the depository. The physical shares are either sent to an RTA or owner company, along with the DRF.
The depository confirms the electronic request from the DP and forwards it to either the RTA or company. The RTA or company on receipt of both the electronic request and documents, confirm the details and send dematerialization mandate to the depository.
On receipt of the mandate, the depository credits the demat shares to the beneficiary account and informs the DP.
The whole process from surrendering the physical shares to CREDIT OF DEMATERIALIZED SHARES to the demat account takes approximately 15-20 days.
Rematerialization is the conversion of shares in electronic or dematerialized format to physical paper format by issuing a share certificate in lieu of the online holdings.
If an investor wishes to remat his shares, he should submit a Remat Request Form (RRF) to his DP, who upon verification, will forward it to the depository. The depository will the status of your demat holdings and further your application to the Registrar and Transfer Agent. The RTA will verify the data and print share certificates for your holdings. It will intimate the depository to delete the demat stocks from your demat account, and then send you the physical share certificate.
Suspending any further transaction from the Demat account for specific reasons is known as freezing the account. An investor can provide written instruction to the DP if he wishes to freeze his account. Demat accounts can also de-frozen by the DP if he suspects foul play in the account or failure by the investor to pay the account maintenance charges.
A minor demat account can be frozen if the account holder turns major.
A frozen account can be de-frozen on the submission of a written request along with the requisite documents by the investor.
If an investor wishes to close his demat account, he should first clear any negative balances of his account. He should fill the DP ID, Client ID, personal details and reasons for closing the account in the account closure form and submit it to the DP. The whole process takes about 7-10 days and incurs no cost. If there are any balance securities in the account, they can either be rematerialized or transferred to any other demat account.