Demat is short for dematerialized or dematerialization. And so, the proper demat account meaning indicates an account where shares and securities are held or transferred from in a dematerialized form. This differs widely from the older method of holding and transferring shares in their physical form.
Dematerialization became the norm of the day since people realized the many risks of carrying and transferring shares in their physical form, such as loss, misplacement or even theft and damage. By holding shares in a digital form in a demat account, all these risks have been successfully countered and overcome.
Moreover, a demat account is also much more accessible and manageable when compared to physical shares and securities. It enables investors and traders to buy, sell, view and monitor shares and securities in a single click. If one wishes to make crucial changes in one’s details, such as mobile number, address or bank account, one can do these easily with the aid of a demat account.
A demat account has also become a cost-effective and economical solution to the additional costs and efforts that could be incurred in using physical share certificates or even the stamp duty applicable on the same. It has also made it possible for investors and traders to sell an unrestricted number of shares.
Most importantly, a demat account is not designed to hold merely shares; it is also perfect for mutual funds, bonds, government securities, exchange-traded funds and more.
Now that you are aware of the numerous advantages of dematerialization and demat account, let’s delve deeper into some more demat account information including related concepts and procedures.
Securities can be certainly transferred from an individual demat account to another demat account without any cost or additional expense. To facilitate this, the holder of the original demat account needs to submit a form to the financial institution responsible for the second demat account. If there are any joint or corporate account holders, all the authorized signatories have to submit the form collectively.
Additionally, a stamped and signed copy of the Client Master Report, which is already available with the new depository, has to be shared as well. It is mandated that the names and details of all the account holders concerned should not be changed or modified.
If an investor is in possession of physical shares or securities, he or she must follow the steps given below to get them dematerialized:
1. Submit a Demat Request Form (DRF) along with the share certificates marked “Surrendered for Dematerialization” to the DP.
2. The DP (depository participant) will enter their details in the system and send the same to the depository. The physical shares are either sent to an RTA (Registrar and Transfer Agent) or company.
3. The RTA or company will confirm the details and will send the dematerialization mandate to the depository.
4. On receipt of the mandate, the depository credits the dematerialized shares to the beneficiary account and intimates the same to the depository participant.
This entire process can take up to anything between 15 and 20 days.
Some investors, due to certain circumstances, would prefer to have their demat shares and securities rematerialized into a physical form. For this, they need to follow these steps:
1. Submit the Remat Request Form (RRF) to the depository.
2. The depository confirms the status of demat holdings and furthers the application to the RTA.
3. The RTA verifies the data and prints the share certificates. It intimates the depository to delete the demat stocks and sends you the physical certificates of the same.
An investor or trader can choose to get his or her demat account frozen as per their requirement or convenience. On the other hand, even a depository participant might choose to freeze a customer’s demat account if any foul play is suspected or if the investor or trader has defaulted on payments.
An investor or trader can get a demat account frozen by sending an intimation of the same to the depository participant. An account can also be unfrozen by the same process.
An investor or trader can intimate the depository participant to get his or her demat account closed. To do the same, the customer needs to clear his negative balances and should fill up the DP ID, Client ID, personal details and specify the reasons for account closure at the same time. The whole process would take between 7 and 10 days and it doesn’t incur any costs. If there are any balance shares or securities, they can also be rematerialized or transferred to any other demat account.
We hope you are clear about this additional demat account information including these concepts and procedures relating to dematerialization of shares and securities.
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