How to Convert Physical Shares to Demat?
If you don’t have a demat account and prefer to hold physical shares for the sake of investment, you might have to re-think your decision. The 2019 mandate of the market regulator Security and Exchange Board of India (SEBI) states that only the shares available in electronic format (i.e., dematerialised form) can be sold or transferred in the stock market.
While this does not mean that you cannot hold physical shares, it does mean that selling and transferring them would not be possible without the investor holding a demat account online. This step was essentially undertaken to make the process of buying, selling, and transferring more convenient. Moreover, there are several benefits of having a demat account online, which make it a better idea to transfer your physical shares online in India.
To trade your physical shares, they will first have to be converted into an electronic format and be stored in your demat account in India. The process of transferring your physical shares online in India is called dematerialisation. It is important to bear in mind that only the shares that are active and trading on the stock exchange can be converted, and so if your shares have been delisted, they are now unfortunately worth nothing.
Prior to converting your physical shares, you will have to have a demat account with a depository participant.
How to Convert Physical Shares to a Demat?
Prior to transferring your physical shares online in India, you will first have to open a demat account with a depository participant (DP). Several DPs offer free services to open a demat account in India. Here are the general steps to open a demat account online:
- Step 1: On the website of your chosen DP, select the option of opening a demat and trading account
- Step 2: The screen will then ask you to fill out an application form to open your demat account in India.
- Step 3: Once you will the form, you will be asked to upload the scanned copies for KYC. This includes your proof of income, proof of identity, and proof of address
- Step 4: You will have to sign an agreement with your DP, which includes the responsibilities of both parties. It is recommended to read the form carefully.
- Step 5: Finally, your application will be processed by the DP, and upon successful approval, you will receive your user ID and password to access your trading account.
Benefits of Transferring Physical Shares to a Demat Account
Several benefits come with having a demat account online. Some of the most important ones include:
- Better Safety: When you transfer your physical shares online in India, you can rest assured that your shares will not be damaged or stolen. It also gets rid of the possibility that you have counterfeit shares as a demat account in India is maintained by two reliable depositories, namely the NSDL and the CDSL.
- Enhanced Accessibility: With a demat account online, you can invest, store, and trade your stocks anytime and anywhere. You will only require the internet to access your demat account online.
- More Convenient: Aside from the fact that a demat account eliminates the possibility of loss or damage of shares, it also reduces the hassle of unnecessary paperwork, and that saves a lot of the account holder’s time.
- Saves Time: An important advantage of having a demat account online is that you don’t have to make frequent bank visits to trade. Even the statements of the demat account are shared directly with the investor.
Once you complete transferring your physical shares online in India and opening your demat account, you can then generate the request for dematerialisation of physical shares. For this, your DP will ask you to fill the Dematerialisation Request Form (DRF) that you will be asked to sign and share along with your physical shares.
After the dematerialisation form is processed, your physical shares are destroyed, and your demat account gets credited with the electronic copy of your shares.
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Just as a bank account stores your money, your demat account holds your shares and securities from the capital market. It can also be used to hold a variety of other financial commodities such as mutual funds, exchange-traded funds, bonds, etc.
The process of transferring your physical shares to demat is two-fold. To dematerialise your shares, you will first have to open a demat account with your chosen depository participant. Once this is done, you simply have to fill a Dematerialisation Request Form (DRF) and share it with your DP along with your physical shares. Upon the process of your request, your physical shares will be destroyed, and your account will be credited with the electronic shares.
After 2019 SEBI has mandated that you can only trade and invest in shares that are in the dematerialised form. This was done to ease the process of buying, transferring, and selling company shares.