Long before the digital age, buying and selling shares and securities wasn’t as easy as it is today. One had to purchase securities in a physical form from their broker, the process would take several days, and was quite cumbersome. In today’s day and age, all physical shares and securities need to be converted into a digital form and stored in a demat account under a depository. This process is called dematerialization of securities. The idea behind dematerialization is smoothening the process of buying, selling, transferring and holding shares, all the while making it foolproof and cost-effective.
A depository is like a bank, but instead of cash, it holds securities (like shares, bonds, debentures, government securities, mutual fund units, etc.) of its investors in an electronic form, upon the request of the investors through a registered depository participant. It also provides services related to transactions in securities.
India has two depositories; they are National Securities Depository Limited (NSDL) and Central Depository Services India Limited (CSDL) which are registered with the Securities Exchange Board of India (SEBI).
The process of conversion of physical share certificates into an electronic form is known as dematerialization. This process allows for the smooth transaction of shares and helps to reduce the cost incurred by the shareholder. In the past shares were held in the form of a physical share certificate, which denoted the number of shares held by the holder. This was an outdated form of holding shares, and it faced many issues such as physical damage, theft, fraud, etc. Hence to prevent all these issues, all the physical share certificates were dematerialized.
Dematerialization of Securities is absolutely essential as with the increase in the number of retail investors day by day, it is hard to keep a track of all the papers and documents that come with purchasing physical share certificates. Moreover, an increasing number of papers can lead to missing an important document, which can easily cause a breakdown in the stock market and any business associated with it. Additionally, stamp duty charges will be saved while buying securities in a dematerialized form.
The entire process of dematerialization makes the whole trading process smooth, glitch-free and extremely secure. Its more convenient, efficient and multipurpose activities can be done simultaneously.
A depository is like a bank, but instead of cash, it holds securities (like shares, bonds, debentures, government securities, mutual fund units, etc.) of its investors in an electronic form, upon the request of the investors through a registered depository participant. It also provides services related to transactions in securities.
A depository participant (DP) is an agent of the depository through which it interacts with the investor and provides depository services.
You can choose your required DP to open a demat account just as you would choose a bank for opening a savings bank account. Some of the important factors for the selection of a DP can be:
The process of converting physical shares to electronic shares takes about 15-30 days.
Please note that by submitting the above mentioned details, you are authorizing TradeSmart to call and email you and also to send promotional communication even though the contact number may be registered under DND.
Please note that by submitting the above mentioned details, you are authorizing TradeSmart to call and email you and also to send promotional communication even though the contact number may be registered under DND.
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Please note that by submitting the above mentioned details, you are authorizing TradeSmart to call and email you and also to send promotional communication even though the contact number may be registered under DND.