What Is Dematerialisation and Rematerialisation?

Before the twenty-first century, the trading environment was based on paper. All the trades were executed in the physical format. However, physical trading had many loopholes and considering the effort and money required, trading was not a cup of tea for the ordinary citizen. Many people were put off by investing in the stock market. Moving on with time, the trading world saw a new revival with the introduction of computers and the Internet. The physical certificate is no longer traded in the stock market with instant trading. Instead, investors and stockholders use the digital format of physical certificates to trade in the Indian stock market. The online Demat account offers convenience and an easy-to-trade mode.

Online trading has become less risky, and it’s fast to trade in the stock market. The process of converting physical shares into digital copies is dematerialisation, while the process of converting digital copies into physical ones is rematerialisation.

Continue reading to learn more about dematerialisation and rematerialisation.

Dematerialisation

Demat, also known as dematerialisation, is a simple process that converts physical securities into digital format. When a trader buys securities, they receive digital certificates as the investor is required to open an online Demat and trading account. Dematerialised security eliminates the risk of loss, theft, or misuse of your financial certificates. According to the Depositories Act 1996, you need to dematerialise your physical certificates for buying or selling in the stock market.

All the listed companies in India dematerialise their shares and list them on the stock market. Therefore, traders, as well as investors, must list and trade shares in digital format.

Rematerialisation

An investor who has already converted the physical certificates to digital format also has the option to convert digital securities into physical ones. So, people who opt for the rematerialisation process often avoid paying for the maintenance charge of a Demat account. People can convert their shares in simple steps. All they need to do is fill out a Remat Request Form (RRF) and approach the depository participant (DP) with the form.

Steps for Dematerialisation

Step 1: Open a Demat account with a broker such as Share India.

Step 2: Contact the broker regarding the conversion of physical shares.

Step 3: The broker will proceed with your dematerialisation form.

Step 4: Send your certificates and submit all your financial assets to your stockbroker. After processing, all the physical certificates will be destroyed to maintain transparency in the trade.

Step 5: You will get a confirmation message that you have successfully converted your physical certificate into a digital one.

Step 6: You can check your Demat account holding to see whether you own the digital format of the financial asset or not.

Steps for Rematerialisation

For the rematerialisation of physical certificates, you need to have a Demat account, and you must own shares that you would like to convert into physical certificates.

Step 1: Get the RRF form and submit it to your DP.

Step 2: A DP will approach the respective depository with the form. A request will be moved forward to the registrar.

Step 3: The registrar will print the certificates and mail them to your registered address.

Step 4: Rematerialisation can take up to 30 days.

Can You Buy and Sell Shares?

The buying and selling of shares is only applicable to those shares that are in digital format. According to the guidelines set by the Securities and Exchange Board of India (SEBI), no investor or trader can sell physical certificates. To sell these shares, an investor first needs to dematerialise the share and send it to the respective brokerage firm.

To trade in the stock market, you need to follow the steps mentioned below:

• First, find reliable and experienced DP such as Share India. You can open a free Demat and trading account with Share India.
• With the online platform and mobile app, you can manage your financial portfolio.
• Add funds to your trading portal from your bank account through a debit card, net banking, or UPI.
• To buy shares, select a financial asset such as stocks in a company, and then select the number of shares, check its current price, and place a buy order.
• You will receive the order confirmation. You can then check your transaction history from your Demat account.
• In the case of selling equity, you can select the equity, click on sell, and enter the number of equities you wish to sell that you have held in your Demat account.

Some Technical Terms You Might Come Across

A Share Issuing Company

This is a big or small corporation that tends to issue its shares in the public market. To list shares of a company, a company needs to follow the guidelines set by SEBI, and audit and submit company financial records to SEBI. After the approval, they can list their shares in the public market.

A Depository

A depository is a storage place where the holdings of investors are safeguarded and available for access from the stock broker platform. There are two depositories in India—the National Securities Depository Limited (NSDL) and the Central Depository Securities Limited (CDSL).

Depository Participants

These are the agents of the depositories that are registered with SEBI. An investor can open a Demat and trading account with them. You can also get a complete brokerage service or a discount brokerage service, depending on the brokerage company.

Conclusion

Both dematerialisation and rematerialisation are key terms in online trading. To trade online, it’s essential to open a Demat account. You can open a free Demat account with the Share India trading platform. It provides a tech-driven trading platform along with low brokerage charges.

In this blog, we have discussed the distinction between dematerialisation and rematerialisation. You can choose whatever format you want to own financial securities in. According to the Indian government, it is critical to dematerialise physical security in order to benefit the public and traders. If you own shares in physical form and want to sell them, you must first open a Demat account and request that the shares be dematerialised.

Frequently Asked Questions (FAQs)