Dematerialization is the process of converting the physical forms of shares into electronic form. It helps to overcome the problems like delay in transfer of certificates, forgery of certificates etc.
This blog discusses the procedure and advantages of dematerialisation.
According to depositories act 1996, an investor has the option to hold shares either in physical or electronic form.The process of converting the physical form of shares into electronic form is called dematerialisation.
To convert the shares into electronic form the investor should open an account with any of the depository participants.An account number (client ID) will be allotted after signing the agreement which defines the rights and duties of the DP and the investor wishing to open the account. The client ID along with the DP ID gives a unique identification in the depository system. Any number of depository accounts can be opened.
After opening an account with the DP the investor should surrender the physical certificates held in his name to a depository participant. These certificates will be sent to the respective companies where they will be canceled after dematerialization and will credit the investor’s account with the DP. The securities on dematerialisation will appear as balances in the depository account.
* There is no chance of bad delivery at the time of selling shares as there is no signature mismatch.
* Transaction costs are usually lower than that in the physical segment.
* The bonus /rights shares allotted to the investor will be immediately credited to his account.
* Share transactions like sale or purchase and transfer/transmission etc. can be effected in a much simpler and faster way.
Team Broking Advisor