The Securities and Exchange Board of India (SEBI) has made it mandatory to convert physical shares into Dematerialized form i.e. electronic format. In case, you still own some old shares in physical form, you are required to convert them to Demat form. Because you cannot trade shares in physical form anymore.
The process of converting physical certificates into Dematerialised form is known as Dematerialization. Dematerialisation of shares requires a Demat account. Therefore, you need to open a Dematerialisation account first, popularly known as Demat accounts, in order to complete the Dematerialisation process. And then you can raise a request to convert your physical shares to Demat format.
At first, you need to open a Demat account with Depository Participants (DP). They are registered entities with central depositories, NSDL or CDSL, and render financial services to investors on behalf of these depositories.
Select a Depository Participant to open an online Demat account. If you are opening a Demat account just for conversion purposes and will not be active in the stock market, you can choose a basic Demat account with a discount broker. And if you are going to participate in the stock market actively, you can choose a discount broker or a full-time broker depending on your needs. Full-service brokers provide investing and trading assistance through research reports prepared by experts.
Steps to open a Demat account
A Demat account is an account that holds the financial securities in electronic form. To open a Demat account is very in an online form. Just follow the suggested simple steps and open it in a couple of minutes.
The following steps are involved in opening a Demat account:
Step 1: Go to the depository participant’s website that you have selected to open a Demat account. Open Demat account opening form.
Step 2: Enter your basic details and PAN details.
Step 3: Enter your KYC details like address, email id and phone number..
Step 4: Upload your documents’ copies in digital form. It can be in jpeg or pdf format as per the demand of your depository participant. Common documents demanded by depository participants are Identity proof, Address proof, Income proof, Bank account details, Aadhar number, passport size photo, signature.
Step 5: You need to go through an in-person verification process. It is also an online process to validate your ID. You need to record a video reading the given script and upload it.
Step 6: Once the KYC info you submitted online will get verified, you will be allotted a Demat account to store your shares in Dematerialized format.
The following are the steps to convert physical shares to Demat:
Step 1: Get the Dematerialisation Request Form (DRF) from your depository participant.
Step 2: Fill up the DRF, put your signature and attach your physical share certificates with it. You need to mention ‘Surrendered for Dematerialization’ on every certificate of share. Submit the filled-in DRF along with surrendered share certificates to the depository participant.
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Step 3: Once you submit the surrendered certificates, your depository participant will process your Dematerialization request. The request application will be sent to the Registrar and Share Transfer Agent (RTAs).
Step 5: The RTA will approve your Dematerialisation request and your share will get credited into your Demat account. You can check the relevant number of shares in your Demat account.
That’s it. Your share certificates will be destroyed and you will have them in your Demat account only.
Dematerialisation is the primary function of Demat accounts. Along with easy Dematerialization of securities, there are several other benefits of Demat accounts. Some of these benefits are:
- Convenient, safe, and secured online storage for a variety of financial securities like shares, debentures, bonds, exchange-traded funds, mutual funds etc.
- Get corporate benefits credit automatically.
- Reduced transaction cost for share transfer.
- Reduced risk of forgery, delayed transfer etc. No risk of theft like physical share certificates.
- Fast process of share transfer. You can transfer your shares to another Demat account easily.
Thus, this is the two-tier process of conversion of shares. The process will take a maximum of 15-20 days to get credited into your Demat account. After that, you can sell, gift or transfer these shares to another Demat account. If you have any confusion about how to transfer shares from one Demat account to another, do not get confused, just do it online through CDSL’s EASIEST and NSDL’s Speed-e Facility or get a Delivery Instruction Slip (DIS) from your depository participant and transfer shares manually.