Dematerialization of share process in demat account how to Convert paper shares into electronic form

What is dematerialization and its advantages and disadvantages 

Dematerialization process in demat account 

WHAT is Demat Account ?                                           

     According to India's share market In INDIA , shares and securities are held electronically. In 1996 , dematerialization was embraced. 

What is meant by dematerialisation?

Dematerialization is the process by which physical shares certification held by an investor and converted into an equivalent number of securities in electronic form and certified into the investor's d-mat account . Demat account is not just fore shares but also for debt investments like bonds and can hold all your investments in a single account .

     In other words dematerialization  is a the process of converting the physical shares into electric form . The one who to invest in share market are said to be investors . 

And for that they need to open a Demat account with the depository participant to transact in shares and securities in electronic form . Also investors having physical shares and securities they also can be converted into electronic form by opening demat account and surrounding physical shares.

     As each demat account number has a unique identification . So at the time of buying shares they automatically  get deposited in Demat account there is no need of providing unique id each time while trading is done.

Advantages of dematerialization 

1 . It has easy accessibility and also mobility in stock trading .
 2 . Full security .
 3 . Less paper work .
 4 . There is no stamp duty .
 5 . It has low cost per transaction .

There are also benefits (advantages) to demat account  :-

1 . Common account ( even if you have multiple bank A/C or trading A/C they can be hold by a single Demat A/C) .
2 . Demat account is lower in cost .
3 . It has auto update feature .
4 . Working with d-mat account is very safe and secure .
5 . Immediate transfer of securities .
6 . For an investor depository system reduces risks that are involved while holding physical certificates .

    While demat is holding so many  advantages there are also few disadvantage that one should know before entering into it .

Disadvantages of demat account

1 . Multiple regulatory framework need to be confirmed before including the depositories act .
2 . Trading in securities may become uncontrolled in cash of dematerialized securities .
3 . There is no provision to close d-mat account that has illiquid shares .
4 . Even the investor cant close the account also his successors have to go on paying the charges to the participant for eg : annual folio .

5 . The role of the key market players in case of dematerialized securities , such as stock-broker , needs to be supervised .
6 . Agreements are entered at various levels in the process of dematerialization . This may cause problems for a investor who desirous simplicity .
7 . Regulations and the various by-laws of various depositories .

Hope the article was helpful do leave your comments below let us know if you have any questions. All your feed backs are welcomed as they will let us grow.You can like, share and subscribe to stay updated with this blog through email. also you can follow us on our social media accounts.

R P Vani

The Villain : Smokes and the mirrors ( A Dark billionaire friends -to -enmies -to -loves highschool romance Novel 2021) The Elite Book 1. 

English Version Amazon E-book