Are you looking to know how can a NRI to dematerialize physical shares, if yes then you have this article would give you all the answers. Dematerialization is the process of converting securities such as shares and bonds. The conversion happens from the physical form to the electronic form. This conversion process is what forms the core of dematerialization.
Dematerialization converts the securities held by an investor to its electronic form. The number of physical units is equal to the number of electronic units. The amount is credited to the investor’s demat account.
Advantages of dematerialized securities
Dematerialized securities are a more convenient way of holding securities. If you have shares of multiple organizations, you typically convert all of them into electronic form and credit the same to your demat account.
With dematerialization, your securities are transferred instantaneously. You don’t incur any cost on paying stamp duties for the transfer. You also avoid the risk of being cheated or being at the receiving end of a bad delivery.
Dematerialization reduces paperwork to a minimum. You maintain all records of your shares in electronic format. This is more convenient than maintaining them physically.
Whenever you change your address or bank account with the Depository Participant (DP), this information is registered with all the companies in which you hold shares in. This is better than manually updating all your share accounts in various companies with this information. A centralized system that automatically syncs information across your share accounts saves you a lot of time.
In the event of your demise, your shares are transmitted by the DP. Your family members don’t need to correspond with the different companies to obtain your nominated shares. In the event of non-dematerializing your account, your family members may have to go to each company and spend a lot of time in completing the formalities. This is a highly time consuming process. It may not just take days, it may take months together.
You are directly credited with IPO allotted share profits. Your dividend is directed to your specified account from your multiple company shares.
The process of dematerializing accounts
After locating a DP registered with the SEBI (Securities and Exchange Board), you open a beneficiary account with them. You also open beneficiary accounts with any one of the depositories such as NSDL and CDSL.
After filling the dematerialization request form, you submit the same to your DP. The form should enclose the signature of all shareholders. Also enclosed should be the share certificates. You ensure that the names as per the certificate match to the ones on the DP account.
You need to obtain a written acknowledgement from the depository participant (DP). Once you fill he dematerialization request form, the DP generates the Dematerialization Request Number. This number is transmitted electronically to the company and transfer agent. The transmission is routed through the concerned depository.
The DP whilst sending the dematerialization request number also sends the physical copies of the share certificates to the companies for cross verification. The company, on receiving the filled and duly signed dematerialization request form and the share certificates proceeds to process the request.
The company electronically approves the request and the same is received by the DP. The DP then proceeds to update your demat account with these details.
Pledging facility of dematerialized shares
A much evolved facility offered to NRI investors and local investors alike is the pledging facility. You can use the dematerialized shares as collateral to obtain loans. This facility is monitored by the DP. You will understand the terms and conditions laid out by the DP concerning this activity.
Dematerialization is highly beneficial for NRI investors who can have a centralized system to manage their multiple portfolio investments. This provides better visibility and tracking power over multiple invesments.