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    ___________ is used to keep our stocks in dematerialised form.


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    FREQUENTLY ASKED QUESTIONSONDEMATERIALISATION Disclaimer: These FAQs are not the interpretation of law but provide only a simplistic explanation of terms / concepts related to the depository system. All information has been updated till September 30, 2008. For full particulars of laws governing the depository system, please refer to the Acts/Regulations/Guidelines/Circulars appearing under the Legal Framework Section. Understanding Depository System

    1.    What is a Depository?

    A depository is an organisation which holds securities (like shares, debentures, bonds, government securities, mutual fund units etc.) of investors in electronic form at the request of the investors through a registered Depository Participant. It also provides services related to transactions in securities.

    2. How is a depository similar to a bank?

    It can be compared with a bank, which holds the funds for depositors. A Bank – Depository analogy is given in the following table:



    Holds funds in an account

    Holds securities in an account

    Transfers funds between accounts on the instruction of the account holder

    Transfers securities between accounts on the instruction of the BO account holder

    Facilitates transfer without having to handle money

    Facilitates transfer of ownership without having to handle securities

    Facilitates safekeeping of money

    Facilitates safekeeping of securities

    3.  How many Depositories are registered with SEBI?

    At present two Depositories viz. National Securities Depository Limited   (NSDL) and Central Depository Services (India) Limited (CDSL) are registered with SEBI.

    4.    Who is a Depository Participant?

    A Depository Participant (DP) is an agent of the depository through which it interfaces with the investor and provides depository services. Public financial institutions, scheduled commercial banks, foreign banks operating in India with the approval of the Reserve Bank of India, state financial corporations, custodians, stock-brokers, clearing corporations /clearing houses, NBFCs and Registrar to an Issue or Share Transfer Agent complying with the requirements prescribed by SEBI can be registered as DP. Banking services can be availed through a branch whereas depository services can be availed through a DP.

    5.    What is the minimum networth required for a depository?

    The minimum networth stipulated by SEBI for a depository is Rs.100 crore.

    6.    How many Depository Participants are registered with SEBI?

    As on September 30, 2008, a total of 711 DPs (266 NSDL, 445 CDSL) are registered with SEBI.

    7.    Is it compulsory for every investor to open a beneficial owner (BO) account to trade in the capital market?

    As per the available statistics at BSE and NSE, 99.9% transactions take place in dematerialised mode only. Therefore, in view of the convenience of trading in dematerialised mode, it is advisable to have a beneficial owner (BO) account for trading at the exchanges.

    However to facilitate trading by small investors (Maximum 500 shares, irrespective of their value) in physical mode the stock exchanges provide an additional trading window, which gives one time facility for small investors to sell physical shares which are in compulsory demat list. The buyer of these shares has to demat such shares before further selling.

    8.   What are the benefits of availing depository services?

    The benefits are enumerated below:-

            A safe and convenient way to hold securities;

            Immediate transfer of securities;

            No stamp duty on transfer of securities;

            Elimination of risks associated with physical certificates such as bad delivery, fake securities, delays, thefts etc.

            Reduction in paperwork involved in transfer of securities;

            Reduction in transaction cost;

            No odd lot problem, even one share can be traded;

            Nomination facility;

           Change in address recorded with DP gets registered with all companies in which investor holds securities electronically eliminating the need to correspond with each of them separately;

          Transmission of securities is done by DP eliminating correspondence with companies;

           Automatic credit into demat account of shares, arising out of bonus/split/consolidation/merger etc.

          Holding investments in equity and debt instruments in a single   account.

    Account Opening

    9.   How can services of a depository be availed?

    To avail the services of a depository an investor is required to open a Beneficial Owner (BO) account with a Depository Participant (DP) of any depository.

    10. How can one open an account?

    First an investor has to approach a DP and fill up an account opening form. The account opening form must be supported by copies of any one of the approved documents which serve as proof of identity (POI) and proof of address (POA) as specified by SEBI. Apart from these PAN card has to be shown in original at the time of account opening from April 01, 2006.

    स्रोत : www.sebi.gov.in

    What is dematerialisation of shares

    India adopted the demat System successfully and there are plans to facilitate trading of almost all financial assets in demat format in future

    What is dematerialisation of shares

    What is dematerialisation of shares India adopted the demat System successfully and there are plans to facilitate trading of almost all financial assets in demat format in future

    Investment Yogi  |  Hyderabad

    Last Updated at July 25, 2013 14:32 IST

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    In order to mitigate the risks associated with share trading in paper format, dematerialisation concept was introduced in Indian Financial Market. Dematerialisation or Demat in short is the process through which an investor’s physical share certificate gets converted to electronic format which is maintained in an account with the Depository Participant.

    India adopted the demat System successfully and there are plans to facilitate trading of almost all financial assets in demat format in future. Through this article, we will try to understand the demat process and its benefits from common investor’s perspective.

    What is it?

    Dematerialisation is the process of converting physical shares into electronic format. An investor who wants to dematerialise his shares needs to open a demat account with Depository Participant. Investor surrenders his physical shares and in turn gets electronic shares in his demat account.

    Storage of Dematerialised Shares - Depository

    Depository is the body which is responsible for storing and maintaining investor's securities in demat or electronic format. In India there are two depositories i.e. NSDL and CDSL.

    Who is a Depository Participant?

    Depository Participant (DP) is the market intermediary through which investors can avail the depository services. Depository Participant provides financial services and includes organizations like banks, brokers, custodians and financial institutions.

    Advantages of Demat

    Dealing in demat format is beneficial for investors, brokers and companies alike. It reduces the risk of holding shares in physical format from investor’s perspective. It’s beneficial for brokers as it reduces the risk of delayed settlement and enhances profit because of increased participation.

    From share issuing company’s perspective, issuance in demat format reduces the cost of new issue as papers are not involved. Efficiency and timeliness of the issue is also maintained while companies deal in demat format.

    There are a lot of other benefits, but let’s focus on benefits with respect to common investor and the same are listed below.

    • Demat format reduces the risk of bad deliveries

    • Time and money is saved as you are not dealing in paper now. You need not go to the notary, broker for taking delivery or submitting the share certificate

    • Liquidity is very high in case of demat format as whole process in automated.

    • All the benefits of corporate action like bonus, stock split, rights etc are managed through the depository leading to elimination of transit losses

    • Interest on loan against demat shares are less as compared to physical shares

    • Investors save stamp duty while transferring shares in demat format.

    • One needs to pay less brokerage in case of demat shares

    Demat Conversion

    Most of the trading in shares are done in demat format now a day, but there are few investors who still hold shares in paper format. You cannot deal in paper shares now, so you need to dematerialise them first. In order to dematerialise physical/paper shares, investors need to fill Demat Request Form (DRF), and submit the same along with physical shares. DRF is available with the DP and you simply need to raise a request for demat conversion with the DP.

    Their representative will come and get the DRF form signed. So the complete process of dematerialisation involves:

    1. Investor surrenders the physical certificates for dematerialisation to the DP along with DRF.

    2. DP updates the account of the investor and shares are allocated in investor demat holding.

    Source: InvestmentYogi is one of the leading personal finance websites in India

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    First Published: Thu, July 25 2013. 14:27 IST


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    Dematerialization (DEMAT): Definition, How It Works, Benefits

    Dematerialization, or DEMAT, is the transition away from paper certificates to a form of electronic record for stock transactions.


    Dematerialization (DEMAT): Definition, How It Works, Benefits

    By MITCHELL GRANT Updated August 26, 2020

    Reviewed by ERIC ESTEVEZ

    What Is Dematerialization (DEMAT)?

    Dematerialization (DEMAT) is the move from physical certificates to electronic bookkeeping. Actual stock certificates are then removed and retired from circulation in exchange for electronic recording.


    Dematerialization (DEMAT) is the move from physical certificates to electronic bookkeeping.

    DEMAT accounts are required by some trading institutions due to the fact they are the most accurate form of record keeping.

    Dematerialization was designed to offer more security, as well as increased speed, to financial trades. It has become the norm in bookkeeping for financial institutions.

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    Click Play to Learn What Dematerialization Is

    How Dematerialization Works

    With the age of computers and the Depository Trust Company, securities no longer need to be in certificate form. They can be registered and transferred electronically.

    The introduction of dematerialization allowed for accounts to be updated automatically and swiftly.

    In earlier eras, transactions at stock exchanges were conducted by traders who shouted buy and sell prices. The deals were recorded on paper receipts. After the markets closed, the paperwork would continue in order to properly register all the transactions.

    The Benefits of Dematerialization

    Through dematerialization, so-called DEMAT accounts allow for electronic transactions when shares of stock are bought and sold. Within a DEMAT account, the certificates for stocks and other securities of the user are held as a means for seamless trades to be made.

    The introduction of dematerialization served to eliminate such a paper-oriented process. Furthermore, by adopting electronic bookkeeping, this allowed for accounts to be updated automatically and swiftly.

    Dematerialization applies not only to stocks, but also to other forms of investment such as bonds, mutual funds, and government securities. The use of dematerialization and DEMAT accounts is comparable to using a bank and bank accounts to maintain one’s assets rather than personally storing and exchanging paper money each time a transaction is made.

    Using a debit card at a store creates a digital record of purchase and the amount is deducted from the cardholder’s account. Funds are exchanged between buyers and sellers without paper currency. Likewise, with dematerialization, the stock transactions are completed without physical certificates.

    Brokers or other intermediaries will typically retain the electronic records of the transactions associated with the assets.

    If the holder of a physical, paper bond or other security wishes to dematerialize the document, they usually surrender the certificate with an intermediary. They should receive some sort of electronic notification that the record has been dematerialized and they may proceed with conducting transactions.

    Some assets—for example, publicly traded shares—require a DEMAT account to engage in trades and other transactions. This is because markets now operate through electronic transactions rather recorded on paper.

    The benefits of dematerialization can also include increased security and surety of transactions and the elimination of steps that could slow down the process of clearing transactions. Errors can be avoided that might otherwise be introduced in the handling of physical records. There might also be some savings by eliminating paperwork that may have included processing fees.


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    स्रोत : www.investopedia.com

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