Understand The Way To Demat Certificates Of Your Physical Shares

Capital market regulator(SEBI) is looking at discontinuing trading of physical shares and making demat mandatory for transfer of physical shares.

Now that practically all stock market transactions happen in demat form, many shares are in a compulsory demat list. If an investor still holds physical certificates for these shares, stock exchanges provide an additional trading window to sell them. The buyer has to then convert them to demat format before selling them. 

How to Convert physical Shares to Demat form?

If you are dealing with shares in recent times, chances are high that you understand the tendency of modern brokers that insist you deal only with dematerialized form of shares. This, undoubtedly, makes the situation pretty challenging for many investors, especially for them that hold physical shares. It is evident that holders of physical shares are mostly senior citizens that find it pretty impossible and difficult to convert the same in demat format. A recent study has brought into the limelight that about 300 crore shares of the present Sensex companies are available in physical form. There is hardly any room of doubt that dematerializing of your share would allow you to avoid the risk of losing the certificate or duplicating the same.

Learn the first step

The first and foremost thing you need to convert your physical shares to demat form is to open a recipient account with a depository participant, if you do not have any demat account. The depository participant is usually a broker or agent that interfaces with the bank. To open the beneficiary account, you need to fill up the account opening form properly and signing a deal with the depository participant. It is worth to mention in this context that at the time of opening up the demat account, you need to provide all the required details that include particulars of your bank account along with the name and branch of the bank, etc.

Process of transferring

Next, it comes to dematerialize the physical shares. Fill up the DRF or Dematerialization Request Form that is available along with the depository participant and submit your share certificates along with the form. In most of the cases, applicant will get the electronic request and physical shares and DRF within two weeks after verification done by the company. They only issue with the electronic request, only if the DRF and physical certificates are found in order. After the conversion is completed, your depository participant or DP will provide you periodic statements of your holdings. Apart from this, DP will also update the account of the clients on a regular basis especially after any transaction.

Get rid of the risk of having physical certificates

It is evident that dealing with physical shares is pretty risky and involves several problems that include bad delivery, delay in processing, fraud transaction and many more. By converting your physical shares to dematerialize form, you can easily avoid such complex and time consuming processes that have a great effect on your investment. Demat is nothing but destroying the old and shabby process to get switch to the latest electronic mode.

Enjoy other advantages

Even though, it is not compulsory to have shares in physical format, most of the shares of present times are traded in demat form. Moreover, some companies even do not deal with physical shares anymore. Apart from these, you will even hardly find any agents that will do the job for you. On the other hand, you can easily purchase or sale your demat share with brokers or agents. Furthermore, having physical shares can even affect your capital gains tax as you do not pay any security transaction tax with your physical shares.

 Process of converting physical shares into demat

• Open an account with a depository participant (DP)
• Surrender physical certificates to DP
• DP intimates to the depository regarding the request
• DP submits the certificates to the registrar of the issuer company
• Registrar confirms the dematerialisation request from depository
• After dematerialising the certificates, registrar updates accounts
• Depository updates its accounts and informs the DP
• DP updates the demat account of the investor
  Source: Sebi