Yes, the REs need to be credited to the demat account for the shareholder to be eligible for applying for the rights issue. The RTA will check the demat account for REs during allotment. While applying for rights shares, the RTA asks the investors to declare whether they already have the REs or have purchased it.
REs are credited to the demat account of the shareholders before the date of opening of the issue. Physical shareholders shall be required to provide their demat account details to “Issuer / Registrar to the Issue” for credit of REs not later than two working days prior to the issue closing date, such that credit of REs in their demat account takes place at least one day before the issue closing date.