Over the past few decades, the stock market in India has transformed radically, with a shift from paper-based physical shares to digital dematerialised (demat) shares.
As of 2023, over 110 million demat accounts were registered in India, showcasing an enormous shift towards digitalization.
However, about 1-1.5% of shareholding in securities markets is in physical shares. If you are one of those investors still holding onto physical shares, it’s high time to know how to convert physical shares into demat.
Not only does this process offer increased convenience, but it also introduces heightened security and seamless trading.
Journey Of Physical to Digital
Before we dive into how to convert physical shares to demat, let’s understand what these two forms of shares mean. Physical shares are securities in physical paper form.
On the other hand, demat shares are shares that are held electronically in a demat account. In essence, the process of converting physical shares into demat, or dematerialisation, converts your physical holding into an electronic format.
This procedure is done through a depository participant (DP) like Rupeezy and is regulated by the Securities and Exchange Board of India (SEBI).
Step-By-Step Guide: Converting Physical Shares to Demat
Follow the below step-by-step instructions to convert physical shares into demat easily:
Open a Demat Account
The first step to convert your physical shares to demat is to open a demat account. You can do this through a registered DP like Rupeezy.
This step involves filling out an account opening form and providing necessary KYC documents such as PAN card, Aadhaar card, and proof of address.
Submit the Dematerialisation Request Form (DRF)
Once your account is open, you need to fill out a DRF, which you can get from your DP.
The form needs to be filled out carefully, ensuring all details of the physical shares, like the number of shares and certificate number, are accurate.
Submit the Physical Share Certificates
Along with the DRF, you need to submit your physical share certificates to your DP.
The share certificates should be marked as “Surrendered for Dematerialisation”. This is done by writing this on the face of the share certificate.
Verification and Understanding How to Dematerialise Physical Shares
The DP will then forward your DRF and share certificates to the respective company’s registrar and share transfer agent (RTA).
The RTA will verify the documents, and upon successful verification, the physical shares will be destroyed, and the equivalent demat shares will be credited to your demat account.
Remember, the entire process can take up to 30 days to complete.
Costs and Required Documents
The cost to convert physical shares into demat can vary from DP to DP, but it’s usually a nominal fee. Some DPs might even waive off the fee as a part of their promotional offers.
When it comes to documents, you’ll primarily need your PAN card, Aadhaar card for address proof, a passport-sized photograph, and the original share certificates for the dematerialisation process.
Some DPs may require additional documentation, so it’s always advisable to check with them first.
Benefits of Converting Physical Shares to Demat
Converting physical shares into demat is beneficial for a multitude of reasons. Here’s a snapshot of why it’s worth taking the step:
|Benefits||Dematerialisation vs Rematerialisation|
|Elimination of Risk||With physical shares, you risk misplacement, theft, or damage. Dematerialising eliminates these risks, as your shares are safely stored digitally.|
|Ease of Transaction||Demat shares allow for seamless online transactions. You can buy, sell and transfer shares at the click of a button.|
|Lower Costs||Physical shares involve stamp duty costs, while demat shares do not. Furthermore, many DPs provide cost-effective services, reducing the overall transaction cost.|
|Reduced Paperwork||Managing physical shares means dealing with heaps of paperwork. In contrast, demat shares require minimal paperwork, simplifying the overall management.|
|Quick & Convenient||Share transfers with demat shares can be done swiftly, compared to the time-consuming process of physical share transfer.|
|Automatic Updates||Any corporate actions like bonus issues, stock splits, or mergers are automatically updated in your demat account.|
|Portfolio Monitoring||You can easily monitor your portfolio through your demat and trading account in digital form without a need to maintain separate account of your holding and value at any time.|
Dematerialization vs Rematerialization
Understanding the fundamental difference between Dematerialization (Demat) and Rematerialization (Remat) is crucial for anyone dealing with securities and investments.
Dematerialization refers to the process of converting physical securities like share certificates, bonds, etc., into digital format.
This is done to facilitate easy handling and to simplify the process of trading in securities.
This process eliminates the risk of loss, theft, or damage of physical securities. It also makes transactions more efficient and faster.
As a shareholder, you can track your securities and portfolio within seconds through your demat account.
There are many investors who did not convert shares into digital format and their heirs struggle to consolidate the holdings, get shares converted to their name or even sell them due to the cumbersome documentary process.
Hence, it is advisable to convert shares into digital form to avoid these issues.
To dematerialize your physical securities, you need to fill a Dematerialization Request Form (DRF) and submit it to your Depository Participant (DP) along with the physical securities.
The DP will then process your request, and your digital securities will be credited to your Demat account.
Rematerialization is the reverse of dematerialization. It is the process of converting digital securities back into physical form.
Some investors prefer holding physical certificates as a tangible asset, especially if they are not actively trading. In such cases, rematerialization becomes useful.
To rematerialize your digital securities, you need to fill a Rematerialization Request Form (RRF) and submit it to your DP. Once the request is processed, you will receive the physical certificates of your securities by mail.
In essence, while dematerialization aids in the ease of trading and handling of securities, rematerialization caters to the needs of those who prefer tangible assets.
Each serves its unique purpose in the realm of investments.
Understanding the Role of Depository Participants
Depository Participants (DPs) are like the bridge between you and the depository. They facilitate the process of converting physical shares to demat.
Rupeezy is one such registered DP you could consider. Here are the key services they provide:
- Opening of Demat accounts
- Dematerialisation of physical shares
- Rematerialisation of demat shares back into physical form
- Maintenance of demat accounts
Working with a reputable and reliable DP like Rupeezy ensures a smooth and secure conversion process. Rupeezy offers a simple and easy to use app Rupeezy.
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Legal Angle: SEBI’s Mandate
In 2019, the Securities and Exchange Board of India (SEBI) declared that securities of publicly listed companies could only be transferred in dematerialised form.
This decision further pushed the need for investors to convert their physical shares into demat.
Although holding physical shares isn’t illegal, selling these shares would require them to be in demat form. So, if you plan to trade, it’s imperative to convert your physical shares to demat.
Conclusion: Making the Switch with Rupeezy
Dematerialisation is not a new concept, demat and online trading has taken over the world of stock trading.
From the convenience it offers to the security it provides, converting your physical shares to demat is a smart move.
If you hold physical certificates, you can approach any reliable DP like Rupeezy. The dematerialisation process is simple and efficient.
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- Dematerialisation is a Process: Converting physical shares to demat isn’t instantaneous; it’s a process that involves multiple steps, from opening a demat account to submitting your physical shares for dematerialisation.
- Role of Depository Participants: DPs like Astha Trade play a crucial role in the conversion process. They are the bridge between you and the depository.
- Legal Requirements: As per SEBI’s mandate, trading in the stock market requires shares to be in demat form. Holding physical shares is not illegal, but trading them is.
1. Can I convert physical shares to demat online?
While you can initiate the process online by opening a demat account, physical share certificates must be physically surrendered to your DP, so it cannot be done entirely online.
2. How much does it cost to convert physical shares into demat?
The cost varies from one DP to another. Some may offer the service for free as part of promotional campaigns, while others may charge a nominal fee.
3. What documents are required for dematerialisation of shares?
Necessary documents include PAN card, Aadhaar card, a passport-sized photograph, and the original share certificates.
4. What is the procedure for dematerialisation of shares?
The process involves opening a demat account, submitting a Dematerialisation Request Form (DRF), surrendering your physical shares to the DP, and then the DP forwarding your request to the company’s RTA for verification and dematerialisation.
5. Can shares in physical form be sold?
As per SEBI’s mandate, securities of publicly listed companies can only be transferred in dematerialised form, so physical shares need to be converted to demat before they can be sold.