DEMATERIALISATION
Q : What is Dematerialisation?
A : Dematerialisation is the process by which physical share certificates are cancelled and credited in electronic form in the client's account on a highly secure system at the depository.
Q : What is a Depository?
A : A depository is similar to a bank. It holds securities like shares, debentures, bonds, Government Securities, Commercial Papers, units etc. of investors in electronic form and provides services related to transactions in securities. Depository is the one, where all the securities are kept in demat form of all the clients having their demat account.
Q : Can any share certificate be dematerialised?
A : Only those companies which are already listed in the securities list of depositories can dematerialise their shares.
Q : How much time it takes to get the shares dematerialised?
A : The dematerialisation process normally takes between 15-30 days.
Q : What are the services provided by the depositories?
A : The dematerialisation process normally takes between 15-30 days.
- Opening the demat account.
- Dematerialisation i.e., converting physical certificates to electronic form.
- Rematerialisation i.e., conversion of securities in demat form into physical certificates.
- Facilitating repurchase / redemption of units of mutual funds.
- Electronic settlement of trades in stock exchanges connected to NSDL.
- Pledging/hypothecation of dematerialised securities against loan.
- Electronic credit of securities allotted in public issues, rights issue.
- Receipt of non-cash corporate benefits such as bonus, in electronic form.
- Freezing of demat accounts, so that the debits from the account are not permitted.
- Nomination facility for demat accounts.
- Services related to change of address.
- Effecting transmission of securities.
- Instructions to your DP over Internet through SPEED-e facility. (Please check with your DP for availing the facility).
- Account monitoring facility over Internet for clearing members through SPEED facility.
- Other facilities viz. holding debt instruments in the same account, availing stock lending/borrowing facility, etc.
Q : What benefits do depositories provide?
A : Depositories provide a number of benefits like:
- Immediate transfer of securities.
- No stamp duty on transfer of securities.
- Elimination of risks associated with physical certificates such as bad delivery , fake securities , etc.
- Reduction in paperwork involved in transfer of securities.
- Reduction in transaction cost.
- Nomination facility.
- Changes in address recorded with DP gets registered electronically with all companies in which investor holds securities eliminating the need to correspond with each of them separately.
- Transmission of securities is done by DP eliminating correspondence with companies.
- Convenient method of consolidation of folios/accounts.
- Holding investments in equity, debt instruments and Government securities in a single account.
- Automatic credit into demat account, of shares, arising out of split/consolidation/merger etc.
Q : What is the procedure for opening an account with a DP?
A : An investor needs to fill an account opening form for opening a demat account. The DP-Client Agreement provides the details about the rights and duties of investors and DPs.Along with the account opening form, investors have to submit the following documents:
- Proof of Identity : Investors signature and photograph must be authenticated by an existing demat account holder with the same DP or by your bank. Alternatively, investors can submit a copy of Passport, Voters Id Card, Driving License or PAN card with photograph.
- Proof of Address : Investors also have to submit a copy of Passport, Voters Id Card, Driving License or PAN card with photograph, ration card or bank passbook as proof of address.
- Passport-size photograph : The investor has to carry all original documents to the DP for verification and should obtain a copy of the agreement and schedule of charges for future reference.
Q : How many accounts can an investor open with the same DP?
A : An investor is not bound by any restrictions and can open more than one account with the same DP.
Q : Can any another person operate a demat account on the basis of a power of attorney?
A : Any person authorised by an account holder is allowed to operate by executing a power of attorney and submitting it to the DP.
Q : Should investors maintain a minimum account balance of securities with DPs?
A : An investor can maintain a zero balance in a demat account.
Q : How investors can transfer their demat account from one DP to another?
A : An investor can submit an account closure request to the DP for transferring the account from one DP to another. Is it possible to demat debt instruments, mutual fund units, government securities through a demat account? Investors are allowed to dematerialise and hold investments like debt instruments, mutual fund units, government securities in a single demat account.
Q : What is 'Standing Instruction' given in the account opening form?
A : In a bank account, any credits to the account is credited only when a 'paying in' slip is submitted together with cash/cheque. Similarly, in a depository account 'Receipt in' form has to be submitted to receive securities in the account.
Q : What settlement details are required on the delivery instruction slip?
A : Every settlement is identified by a combination of a market type and a settlement number. Investors are required to mention the appropriate settlement details on the delivery instruction slip while transferring the shares to the broker's account. These settlement details are also available on the contract note issued by the broker.
Q : What is the 'execution date' given on the delivery instruction form?
A : Execution date is the date on which securities will be actually debited from the investor's account. The execution date written on the delivery instruction has to be entered by the DP.
Q : How do investors receive bonus shares or other non-cash entitlements?
A : Investors will have their entitlements directly credited by the company to the depository account.
Q : Is it possible to convert electronic holdings back into physical certificates?
A : Conversion of securities to physical form may be availed by requesting the DP.
Q : Can investors confirm whether the bonus/rights entitlement is credited to their account?
A : An allotment advice will be sent by the Issuer/ its R&T agent for bonus/ rights entitlement. The Transaction Statement given by the DP, will also show the bonus/ rights credit into the account. The quantity shown in the advice and statement of transaction should match.
Q : How do investors receive dividend / interest or other cash entitlements?
A : Investors will receive their payments from the company through the ECS (Electronic Clearing Service) facility or will be issued warrants on which investor's bank account details are printed.