India successfully accepted the demat of shares system, and there are plans to make demat trading available for practically all financial assets in the future that is creating demat of shares.
The dematerialisation (demat of shares) idea was developed in the Indian Financial Market to alleviate the hazards associated with share trading in paper format. Dematerialisation demat of shares, or Demat, is the process by which an investor's physical share certificate is transformed to an electronic format and stored in a Depository Participant account.
India successfully accepted the demat system, and there are plans to make demat trading available for practically all financial assets in the future. We will try to comprehend the demat process and its benefits from the standpoint of a regular investor in this post.
What is it?
The required to transform physical shares into electronic forms is known as dematerialisation (demat of shares). To dematerialize (demat of shares) his shares, an investor must create a demat account with Depository Participant. Shareholder surrenders physical shares and receives electronic shares in his demat account in exchange.
Depository for Dematerialized Shares Depository is the entity in charge of holding and preserving an investor's securities in demat or electronic form. NSDL and CDSL are the two receptacles in India.
Demat Conversion
The majority of share trading is now done in demat format, however a few individuals still own shares in paper format. You can no longer trade paper shares, therefore you must first dematerialize them. Investors must fill out a Demat Request Form (DRF) and submit it with their physical shares in order to dematerialize their shares. DRF is available through the DP, and all you have to do is submit a request for demat conversion.
Their representative will arrive to sign the DRF form. As a result, the entire dematerialisation (demat of shares) process entails:
- The investor surrenders the physical certificates to the DP together with the DRF for dematerialization.
- The investor's account is updated, and shares are assigned to the investor's demat holding.
Conclusion
Investors, brokers, and businesses all benefit from dealing in demat format (demat of shares). From the investor's standpoint, it minimises the risk of holding shares in physical form. Brokers benefit since it decreases the risk of late settlement and increases profit due to more participation. Because no paperwork are needed, issuance in demat format lowers the cost of a new issue for the issuing firm. Companies dealing with demat format preserve the issue's efficiency and timeliness.
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