How to Convert Physical Shares into Demat: Detailed Guide

Demat Account Meaning & Definition

A demat account, also referred to as dematerialized account, holds shares and securities in digital form. Just like a savings bank account, a demat account stores an electronic record of your ownership of securities. When you buy or sell these equities, the transfer of ownership is recorded in your demat account.

By digitally storing securities, a demat account simplifies your investment journey while ensuring the security and efficiency of your securities transactions.

 

Demat means Dematerialisation

The process of converting physically held paper certificates into digital form is called dematerialization process. It involves the transfer of physical certificates to a depository participant (DP), who in turn transmits them to the company or its registrar. Once the company verifies the genuineness of the certificates, the shares are debited to the concerned Demat account.

 

Benefits of Dematerialised Shares

Here are the main benefits of dematerialised shares that every investor must know before converting their shares into Demat:

• Elimination of Risks: Demat shares have certain advantages over physical certificates since they cannot be stolen, lost, damaged, or forged.
• Ease of Transfer: Exchanging shares is easy as this does not involve the use of documents such as physical share certificates.
• Convenient Transactions: Trading in shares, such as buying, selling, and pledging, is made easy by a Demat account since it connects to trading websites.

 

Dematerialization v/s Rematerialisation

While dematerialization can be described as the process of converting physical shares into electronic form, re-materialization is the reverse of that. This refers to the act of exchanging electronic shares with physical share certificates. It is not practiced at present mainly because there are many benefits of holding shares digitally.

 

How to Dematerialize Your Physical Share Certificates?

To dematerialize your physical share certificates, you need to follow a structured process:

• Open a Demat Account: As a stock market investor, you must select a depository participant (DP) or stock broker and then register for a demat account. Some of the document for demat account that you are required to submit include identity documents, residential documents, and a recent photograph.
• Submit the Demat Request Form (DRF): Ask your DP to provide you with the DRF. You must complete it and enclose the physical share certificates. Make sure all the details are correct to avoid cases where changes may slow down the process.
• Surrender Physical Certificates: Enclose the DRF with the original share certificates and forward the same to your DP. The DP will make sure of the details and dispatch the certificates to the company or the registrar.
• Verification by the Company: The company checks the validity and authenticity of the certificates and then grants the dematerialization request.
• Credit to Demat Account: Once they are approved, you get the shares credited to your Demat account and you receive a confirmation from your DP.

 

Documents Required to Convert Physical Share Certificates to Demat

Here are all the documents you must present to convert physical shares into Demat:

• Demat Request Form (DRF): It must be duly filled and signed by the shareholder.
• Physical Share Certificates: Submit the original share certificates to be dematerialized.
• Client Master Report (CMR): It is issued by your DP that details your Demat account information.
• Identity Proof: PAN card, Aadhar card, or passport.
• Address Proof: Utility bills, Aadhar card, or passport.

 

Disadvantages of Using Physical Share Certificates

The main disadvantages of using physical share certificates for trading:

• Risk of Loss or Theft: The physical certificates come with some risks, such as loss, theft, or damage, which affects shareholders.
• Lengthy Transfer Process: Transferring shares has to be done manually and may take up to two weeks to accomplish.
• Higher Costs: Administrative fees, stamp duty, and storage are some of the factors that make it costly to own physical shares.

 

Conclusion

Converting physical share certificates into demat has many benefits, from seamless trading to reduced costs. The benefits also include security, transaction convenience, faster settlement, and transparency. Follow the steps mentioned to easily transfer your shares to a digital form.