India has two major stock exchanges, the Bombay Stock Exchange and the National Stock Exchange. BSE was set up in 1875, while the NSE in 1992. Over the years, both stock exchanges have been a source of enormous wealth creation for innumerable investors. Before, you had to visit the two stock exchanges to trade. Today, you can trade anywhere and anytime through an online trading portal.
With the introduction of online trading, dematerialisation has become important. Dematerialisation means the conversion of physical securities into electronic format. The Securities and Exchange Board of India has made dematerialising all physical securities compulsory. All dematerialised securities are held in your Demat Account.
To answer what is Demat Account, it is a depository account. You can open an account with any leading stockbroker firm, offline or online.
Benefits of dematerialisation
- Facilitates safekeeping of securities – Security was a significant concern with physical securities. It could be forged, misplaced, or stolen. Dematerialisation handles all security concerns. It assures the safekeeping of all your securities in your Demat Account.
- Offers instant access – As mentioned, dematerialisation converts physical securities into electronic format. You can access them easily by logging into your Demat Account. This lets you make seamless transactions.
- Hassle-free maintenance – You need a proper storage space with physical security. Furthermore, physical share certificates are often vulnerable to wear and tear despite appropriate storage. Dematerialisation facilitates hassle-free maintenance of your physical securities.
Process of dematerialisation
You need a Demat Account to convert your physical securities into dematerialised form. Open Demat Account with your preferred depository participant.
- Fill out and submit the Dematerialisation Request Form available with your DP. Along with the form, submit all physical securities certificates. You need to mention ‘surrendered for dematerialisation’ on each security certificate.
- The DP processes your dematerialisation request through the depository. There are two depositories in India: National Securities Depositories Limited and Central Depositories Services Limited. You can open Demat with either of the two depositories.
- Once the depository accepts your dematerialisation request, the securities will instantly reflect in your Demat Account. You get notified via an SMS and email alert on deposit.
- The process of dematerialisation can take anywhere between 15 to 30 days. Once the dematerialisation process completes, you can discard your physical securities certificates.
- Later, all your physical securities will be held in your Demat Account.
If you are still unsure of what is Demat Account, think of it as a Savings Account. Like Savings Account holds your money securely, similarly, a Demat Account holds your securities securely.