Demat account - Concepts and Processes

• It is a time-saving approach to trading. Within a fraction of second, traders can transfer, buy and sell shares using their Demat account without wasting much time.
• In one single account, all the mutual funds, equities, shares, bonds can be held. No separate account for different securities is required. Also at one place traders can check the status of different securities. They do not have to visit separate different accounts to do so.
• Chances of losing physical certificates by some means like robbery, theft get reduced. And no more traders have to worry about the security of shares which they have in physical form earlier.
• All orders are securely placed with the depository participant. Therefore traders do not have to visit different companies whose shares they are holding again and again.
• Traders can trade in any number of shares even 1 by having Demat account which was not possible earlier when shares were physically held by the traders in the form of certificates. Traders can take a decision on the basis of their investment goals entirely and not have to focus on any other constraint.
• The unnecessary cost of issuing and distributing physical copies of shares is completely eliminated. Although, if a trader wishes to have a physical copy of his/her shares he can. He/she just has to make a request for the same and pay its charge.

Individuals can transfer their holdings from one Demat account to another account without any additional charge. The account holder should submit the form to the respective financial institution. The Demat account holder should submit the form to the respective financial institution or the current stockbroker. The broker will take 1-2 business days to transfer these shares to your Demat account with the target stockbroker. If they wish to transfer a joint Demat account, they will have to open the new one in the same names.

A depository is a centralized location where all electronic securities are held. It facilitates the 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. They provide the facility of Demat account to investors.

In this process, physical certificates are converted into electronic securities. As Stock Exchange transactions is operated in the Demat form only, it is good to hold your securities in electronic form. This way, it’s easy to transfer securities held in Demat form without any stamp duty on it. All transactions are executed electronically, which makes it mandatory for investors to follow suit.

The SEBI, which stands for the Securities and Exchange Board of India is the regulatory authority for stock investments in India. It has taken many 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 CDSL.

• Dematerialization begins with opening a Demat account. To open an account, the investor needs to shortlist a Depository Participant (DP) that offers Demat services.
• Next, the investor should submit a request to the DP in the Dematerialisation Request Form (DRF) for dematerialization along with the certificates of securities (Share Certificates) to be dematerialized. However, “Surrendered for Dematerialisation” needs to be mentioned on each share certificate.
• The DP verifies the details filled in the DRF including the certificates. The scrutiny involves Verification of Client's signature on the dematerialization request with the specimen signature, comparison of the names on DRF and certificates with the client account, paid-up status, distinctive numbers, etc. If the form and security count is in order, the DP issues an acknowledgment slip duly signed and stamped, to the client. If the securities are not proper they are returned to the client.
• The DP process the request along with the share certificates to the company and simultaneously to the Registrars and Transfer Agents through the depository.
• Once the request is approved, the share certificates in the physical form are destroyed and confirmation of dematerialization sent to the depository.
• The depository then confirms the dematerialization of shares to the DP. Further, a credit in the holding of shares will reflect in the investor's account electronically.

However, this process takes nearly 15 to 30 days from the submission of the dematerialization request.

The word re-materialization is quite self-explanatory. It means, to reappear, return, reveal in literal terms. Here, rematerialization is when the electronic holdings are reconverted to physical certificates by submitting the Remat Request Form (RRF). The RRF should be signed by all holders, verified by the DP and then submitted to the Company or Registrar. The RRF needs to be submitted to the investor’s DP, who will verify and forward it to the depository.

The depository will check the status of your Demat holdings and forward 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 instructions to the DP if he wishes to freeze his account. To de-freeze the accounts, holders should put forward a request in the appropriate format as required by the DP. 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.

Suspending any further transaction from the Demat account for specific reasons is known as freezing the account. An investor can provide written instructions to the DP if he wishes to freeze his account. To de-freeze the accounts, holders should put forward a request in the appropriate format as required by the DP. 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.