How to Convert Physical Shares to Demat?
According to the regulations laid out by the Securities and Exchange Board of India (SEBI), you can only trade and invest in shares that are in the dematerialized format. This step was taken primarily to ease the process of buying, selling, and transferring the shares of a company.
If you’re holding physical share certificates, you’re required to first convert them into an electronic format before you can sell or transfer the shares. The process of converting the physical shares of a company into an electronic form is commonly known as dematerialization. You’re required to open a demat account with a depository participant before raising a request for conversion of your physical shares.
Advantages of dematerialized shares
Compared to physical share certificates, dematerialized shares offer many benefits to investors. Some of these advantages are briefly explained below.
- Safety: Since each electronic record of shares is genuine, you don’t have to worry about the authenticity of dematerialized shares. In addition to that, it is also impossible to forge or fake dematerialized shares.
- Accessibility: All the records of shares are held electronically and online. This allows you to access dematerialized shares from almost anywhere and at any point in time via the internet.
- Convenience: Thanks to the electronic nature of dematerialized shares, the problems related to storage and maintenance have been completely eliminated. You won’t have to deal with lost or damaged certificates anymore.
- Security: Unlike physical share certificates, there’s no risk of unauthorized access and theft with dematerialized shares. This is because you’re required to open a demat account to store your shares, which is password protected for enhanced security.
The process of conversion of physical shares to demat
Now that you’re aware of what dematerialized shares are and why they are advantageous, let’s take a brief look at the basic process involved in the conversion of physical shares to demat form.
Open a demat account
Before placing a formal request for conversion, you will have to first initiate the trading account opening process with a depository participant (DP). There are several DPs like IIFL, who offer free demat account opening online services. Listed below are the general steps involved in the demat and trading account opening process.
- Step 1: Visit the website of your preferred DP. Depository participants like IIFL provide you with free demat account opening online services, allowing you to open a trading and demat account quickly and effortlessly.
- Step 2: Click on the 'open a demat and trading account' link.
- Step 3: Fill in the demat and trading account opening application.
- Step 4: Upload scanned copies of all the necessary Know Your Customer (KYC) documents.
- Step 5: Sign the agreement with your DP along with the schedule of charges. This agreement contains the duties and responsibilities of both the depository participant as well as the account holder. Therefore, it is a good idea to read them thoroughly before affixing your signature.
- Step 6: Once all the relevant documents are submitted, your application will be processed by the DP.
- Step 7: Upon successful approval of your demat and trading account application, you will receive a unique user ID and password for accessing your trading account along with a demat account number.
Raise a request for dematerialization of shares
Once you open a demat account, you need to place a request for conversion of your physical share certificates into dematerialized format. The steps mentioned below will give you a fair idea of how to raise a dematerialization request with your DP.
- Step 1: Get in touch with your depository participant for a Dematerialization Request Form (DRF).
- Step 2: Fill up the DRF with all the required details and affix your signature. Forward the duly filled form along with your physical share certificates to your DP. You’re required to mention ‘Surrendered for Dematerialization’ on each of the physical share certificates.
- Step 3: Your DP will process your request once they receive the DRF along with the surrendered share certificates.
- Step 4: A dematerialization request is sent by your DP to the company’s appointed Registrar and Share Transfer Agent (RTA).
- Step 5: Once the dematerialization request is approved, your physical share certificates are destroyed and your demat account gets credited with the relevant number of shares.
While the process of dematerialization may seem lengthy, it requires very minimal user intervention. This entire process of conversion of physical share certificates into dematerialized form is likely to take around 2 to 3 weeks. Once your demat account gets credited, you are free to either sell or transfer your shares as and when you need.