How to Convert Physical Shares to Dematerialised Shares?

Trading has evolved greatly in the past few decades, with investors and traders increasing by the day. Initially, traders were supposed to be physically present at the stock market to carry out trades. They used their voice and hand symbols to buy and sell various shares and securities. This outcry system was even carried out by brokers, who were appointed by traders, which evolved with technology. Brokers are now equipped with various trading technologies, making it easy for them to carry out multiple trades in a small amount of time.

Earlier, trading through physical share certificates made it a long and tedious process. The settlement period was as long as 14 days, making the whole process very time-consuming. Along with this, there were multiple other issues with physical share certificates. During the transportation of these certificates, there was a possibility of them getting damaged or lost. Apart from this, they could be robbed during the transfer procedure or from the possession of the owner. Forgery and other malpractices were rampant as well. Therefore, physical shares had multiple drawbacks.

With the improvement in technology, the Securities and Exchange Board of India (SEBI) was greatly responsible for getting into the dematerialisation process and enabling the transition to a better trading atmosphere. It introduced the process of dematerialisation of securities in 1996 via the Depositories Act 1996. In today’s day and age, one can only trade in securities if they have a Demat account.

What is Dematerialisation?

Dematerialisation is the process of converting all the physical shares into an electronic format. The electronic shares are stored in the Demat account, which is maintained by depositories. In India, there are two depositories responsible for Demat and other services:

• The National Securities Depository Limited (NSDL)
• The Central Depository Services Limited (CDSL)

These two depositories are responsible for all the Demat accounts in India and follow the regulations set by SEBI. Along with this, they are also responsible for safety, ensuring all securities stored in Demat accounts are well protected.

The Process of Dematerialisation Explained

A trader or investor must approach a depository participant (DP) to convert physical shares to dematerialised shares and to make use of any services provided by depositories. DPs are members of depositories that provide various services and act as intermediaries between the depository and the investors. For converting your physical shares to the Demat form, here are the steps one must follow:

Open a Demat Account

If you don’t own a Demat account, you must open a Demat account to transfer your shares from the physical form into the dematerialised form. To do so, you can approach any DP of your choice. A DP can be anyone, i.e.

• Bank
• Stockbroker
• Non-Banking Financial Corporations (NBFC)

If you choose to trade physical securities, a stockbroker would be the perfect choice for you. A broker like Share India will not only help you trade but also enable you to learn about trading. The Share India universe is ever-expanding, focusing on imparting knowledge about all aspects of trading. You can open a Demat account with Share India in 4 simple steps:

1. Fill out the form.
2. Complete the eKYC process.
3. Share your documents.
4. Complete the process with an E-sign and OTP.

Request for Dematerialisation of Shares

Once your Demat account is created, you can get shares dematerialised. It’s a simple process and requires you to submit the Dematerialisation Request Form (DRF). This DRF must be filled and submitted to the DP with whom you have a Demat account. Your request will be processed once the DRF is received and the physical shares are submitted. While submitting the physical shares, mention ‘Surrendered for Dematerialisation’ on each of the physical shares. Your dematerialisation request will be shared with the appointed Registrar and Transfer Agent (RTA) of the company. Once approved, your physical share will be destroyed, and the electronic form will be deposited into the Demat account. Understand in depth about annual maintenance charge (AMC) and its types at Share India.

Documents Required for the Conversion Process

There are multiple documents that one must provide along with the DRF. The documents to be produced to the DP apart from the DRF are:

• Aadhaar Card, Driving License, PAN card, etc., for identity proof.
• Passport, landline telephone bills, electricity bills, insurance copy, gas bills, etc., for residence proof.
• Bank Passbook or account statement for proof of bank account, which must be at least three months old.
• The original physical share certificates in good condition.
• If there are shares of different companies, you will have to submit multiple DRFs.
• If multiple shares are submitted, then a DRF annexure must be provided as well. In case of multiple company shares along with DRF, the DRF annexure must be submitted as well.

Advantages of Dematerialised Shares

There are many benefits, which is why SEBI made it compulsory for the trading of securities to happen with the help of a Demat account. The advantage of having dematerialised shares are:

Secure

It has become very easy to store securities securely. Earlier, it was a hassle to store them as one had to worry about them being misplaced, lost, robbed, or forged. All these issues have been reduced, if not eradicated, with the help of the Demat account.

Convenient

Trading has become extremely easy and can be done on the go. Because of the Demat account and trading account linked to it, trading can be carried out conveniently.

Accessible

Having shares in the Demat account makes it extremely accessible, as one can check one’s portfolio whenever one wishes to. Making changes to the portfolio is relatively easy as the liquidity of these shares is higher.

Cost Efficient

The eradication of physical shares has led to a reduction in the cost of trading. Stamp charges, postal charges, etc., have been eliminated, driving the cost of trading lower compared to the past.

No Minimum Orders

It’s no longer compulsory to buy lots of shares; a trader can even purchase a single share. This makes it easier to buy as many shares as possible without any restrictions.

Conclusion

Through the above steps to convert physical shares to dematerialised shares, you can easily convert and trade all your physical securities. Ensure that you open a Demat account and fill out all the paperwork, especially the DRF and the DRF annexure. Also, make sure that you submit all the shares, as the physical copies will be destroyed once they are converted to the electronic format.

Frequently Asked Questions (FAQs)