Demat accounts were introduced in India in 1996. Before that, shares and securities were traded physically. Opening a Demat account allows investors to hold their securities electronically, making investing, holding, monitoring, and trading faster, more convenient, and cost-effective.
Benefits of a Demat Account
Here are some advantages of having a Demat account:
Lower Risks:
Physical securities can be stolen, lost, or damaged. Bad deliveries and fake securities are also a risk. A Demat account eliminates these risks by holding investments electronically.
Easy Holding:
Managing physical certificates is tedious. A Demat account makes it easy to hold and track all investments in one place.
Odd Lots:
With physical certificates, you had to buy and sell in specific quantities. Demat accounts let you deal with odd lots or single securities.
Reduced Costs:
Physical certificates come with extra costs like stamp duty and handling charges. Demat accounts eliminate these expenses.
Reduced Time:
Without paperwork, transactions are faster. This allows for more efficient buying and selling of securities.
Why You Need a Demat Account
Converting physical securities to electronic form is optional, but it makes monitoring and trading much easier. Physical securities are harder to buy or sell due to fewer agents and buyers.
Features of a Demat Account
Easy Share Transfers:
Use delivery instruction slips (DIS) or receipt instruction slips (RIS) to buy or sell shares.
Faster Dematerialisation & Rematerialisation:
Convert physical certificates to electronic form and vice versa with ease.
Pledging Facility for Loans:
Use your securities as collateral for loans.
Freezing Accounts:
Freeze your account to prevent unexpected transactions.
Multiple Accessing Options:
Access your account through the Internet using a computer, smartphone, or other devices.
SPEED E-Facility:
Send instruction slips electronically, saving time and effort.
Corporate Benefits & Actions:
Automatically receive dividends, refunds, or interest, and get updates on corporate actions like bonus issues or stock splits.
Dematerialisation & Rematerialisation of Shares
Dematerialisation:
Convert physical securities into electronic form for security and convenience, eliminating risks like forgeries and losses.
Rematerialisation:
Convert electronic holdings back into physical certificates if needed.
Steps for Rematerialisation:
- Fill out and submit a Remat Request Form (RRF) to your Depository Participant (DP).
- The DP verifies and forwards the request to the depository.
- The depository confirms the request to the company’s Share Transfer Agents.
- The Share Transfer Agent prints and dispatches the certificates to you.
- The DP sends you a confirmation.
Rights of a Shareholder with Dematerialised Shares
Demat shareholders have the right to:
- Receive rights, shares, and bonuses.
- Get annual reports and other periodical reports.
- Receive dividends.
- Receive notices and participate in general meetings.
- Inspect statutory registers and documents.
- Demand a poll on any resolution at general meetings.
In essence, Demat shareholders enjoy the same rights as those holding physical shares.
