The Securities and Exchange Board of India (SEBI) has long been insisting that all physical shares should be converted to the digital format. Why has the capital markets regulator been intent on this? Such an exercise will make the settlement process quicker and easier. It will also help eliminate fraud committed by share transfer agents. Shell companies too will have a tough time dealing with the electronic mode.
Now, SEBI has cracked the whip. SEBI argues that electronic bookkeeping will bring transparency to the capital markets. The tax authorities will find it easier to track shareholders and identify the real beneficiaries. Keep in mind that the lack of transparency has been bothering the government for quite some time. If you still retain physical share certificates, it is time to convert physical shares to demat now. This can be done easily in a matter of two to three weeks.
Read more: How to transfer shares from one demat account to another
Here is a step-by-step guide on how to convert physical shares to demat.
The first step is to open a demat account with a DP. A DP is an intermediary between you and the depositor. The DP is necessarily registered with SEBI. You could open a demat account even with your bank which can also function as a DP. Ensure that the names in the demat account and the physical share certificates match.
Fill out a dematerialisation request form once your demat account is opened. Take your physical shares with you and surrender them to your DP while filling out the form. Do not forget to write ‘Surrendered for dematerialisation’ on every share certificate.
Once you submit all the documents, your DP will send a message electronically to the Registrar and Transfer (R&T) agent. The R&T agents have been entrusted with the job of maintaining your records.
A dematerialisation registration number will be generated. This will be fed into your dematerialisation request form and sent to the T&R agent along with your original share certificates.
The T&R agent will run a check on the authenticity of the documents you have submitted.
The process to replace your name with your DP’s name begins now. Also, the number of shares getting dematerialised will be recorded in the Register of Members’ account. The Register of Members is the repository which stores the details of the shareholders.
Once this process is completed, an acknowledgement is generated from the Register of Members saying the requisite changes have been made. The number will be forwarded to your DP.
Your dematerialised shares get credited to the demat account.
Read more: How to buy mutual funds online without demat account
Physical shares will be losing their validity very soon. According to SEBI’s ruling, migrating to the electronic or dematerialised format will come into effect from April 2019. The market watchdog believes that electronic bookkeeping is far easier and it reduces the risk of forgery. Moreover, it will boost investor confidence and bring much-needed transparency into the securities market. So, this is the right time to open your demat account . Many people tend to believe that to convert physical shares to demat is a cumbersome process. But that is not true. The process is fairly simple and can be completed within two to three weeks. Once the shares are dematerialised, it would result in more convenience for the investors. The buying and selling of shares could then be done in a matter of seconds. The demat form also guards against any physical damage to the shares.
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