Before 1996, traders had manually made all share market transactions and investments. Everything had to be recorded on paper. Simply put, every time a share was bought or sold, a certificate had to be created. As you can imagine, this meant oodles of paperwork! Thankfully, that isn’t the case anymore.
According to the SEBI (Securities and Exchange Board of India) guidelines, opening a trading account and demat account and converting all your physical certificates to electronic form to continue enjoying ownership over them is mandatory. Now, we have an important question to answer, “How do you dematerialize your physical certificates?” Read on for a step-by-step guide.
Dematerialization Of Physical Shares: Meaning & Benefits
Dematerialization is basically the conversion of physical certificates into digital form. SEBI called for dematerialization because of the several advantages it offers. Here are some of them:
Enhanced Safety
Enhanced safety was one of the primary benefits of digital certificates over paper ones. Unlike paper certificates, electronic certificates eliminate the chances of documents getting lost or misplaced.
Better Accessibility
The conversion of physical certificates into digital form also meant that you could access these dematerialized certificates at any time and anywhere.
Cost Efficient
Storing all the physical certificates in digital form eliminated the need to maintain the hectic paperwork, cutting the costs of their storage and maintenance.
How To Dematerialize Your Physical Certificates? Here’s A Step-By-Step Guide
Dematerializing your physical certificates is an easy process, and the steps to achieve the same have been notified by SEBI itself. However, before proceeding further, it is important to understand two important terms: a depository participant and a depository.
A depository is an entity that holds an investor’s security based on their request. A depository participant is an agent who helps you create and maintain your demat account and enjoy all the depository facilities. Now that we are aware of both of these terms let’s proceed to how to dematerialize your paper certificates.
Creating A Demat Account
- Visit the website of a depository participant of your choice.
- Open a trading account and demat account using the link available on their website.
- Fill in the necessary details in the application form given, and upload all the documents asked.
- Now, sign the agreement with the DP after reading all the terms and charges.
- Once you’re done, your application is submitted and then assessed by the DP.
- Once your application is approved by the DP, you will have a demat and trading account. Also, you will get a unique ID and password for your trading account and demat account.
Requesting Dematerialization
- Once you’re done opening a demat and trading account online, move on to the next step. This includes requesting the conversion of your physical certificates.
- Get in contact with your DP and ask for a dematerialization request form.
- Fill in all the necessary details in the form. Don’t forget to mention “surrendered for dematerialization” in all your paper certificates.
- After following your request, the DP will forward your request form to the Share Transfer Agent and the company’s registrar.
- As soon as your request is approved, your physical certificates become null and void, and your demat account starts functioning.
Important Documents Needed For Dematerialisation
As mentioned, you need to upload some mandatory documents for dematerialization and to open trading account online. Here is a list of such documents:
- An identity proof with a photo like an Aadhar card or your PAN card.
- Your proof of residence.
- Your bank account is proof.
- The original document for the physical certificates you hold.
- Correctly filled out a dematerialization request form.
Summing Up
Now, the stock market has made it mandatory to convert all your paper certificates into digital form for them to be legal. Doing so also makes you eligible for stock trading. You cannot trade using paper shares anymore; opening a Demat account allows you to hold your shares safely.
Additionally, you can trade your shares when you open an online trading account. All of this requires dematerialization, so fill out your dematerialization request form. Always remember that choosing a trustworthy trading platform, like Baja Broking, to buy, sell or hold your dematerialized shares can help you create a strong and centralized trading portfolio.
