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What is Dematerialisation (demat) of shares and what are its benefits?

31, Aug 2020
What is Dematerialisation (demat) of shares and what are its benefits?

Dematerialisation ('Demat' in short form) means conversion of a share certificate or idential investment papers from its present physical certificate form to electronic form for the same number of holding.

It offers scope for paperless trading through electronic platform, whereby share transactions and transfers are processed electronically without involving any share certificate or transfer deed after the share certificates have been converted from physical form to electronic form.

Benefit of Demat :

  • Offer faster shares transfer in the name of buyers
  • Remove  inherent problems of bad deliveries,
  • Avoid delay in processing/fraudulent interception in postal transit,

Dematerialisation of shares is optional and an investor can still hold shares in physical form. But one can not transfer the phsycial share of listed company without getting dematerilsed done. 

In India demat account are maintained by two Depositories are in operation to handle demat - National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL).

How can you open a demat account? :

For investment in shares, one need to have these three in place - a bank account, a trading account and demat account. Once should apprach a full fledged broker with strong credibility to avoid any future fall out.


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