In today's digital world, people hardly prefer owning physical assets that can be owned digitally. The evolution in the financial space led to the formation of Dematerialisation (Demat) accounts. The meaning of demat accounts has transformed how people buy and sell securities in the financial markets. For those who are unaware, trading in the stock market used to happen using physical share certificates representing ownership in a company.. Owning shares in a digital form has various advantages, including ease of trading, security, speed, and compliance with legal requirements. The most important among these is compliance with legal requirements. Let us understand more about the conversion process, its importance, types of demat accounts, and more.
- Why Convert Physical Shares to Demat Account
- How to Open a Demat Account
- How to Convert Physical Share to Demat Account
- Benefits of Holding Shares in Demat Form
- Risks of Holding Shares in Demat Form
- Conclusion
Topics Covered
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Why Convert Physical Shares to Demat Account?
Many years ago, trading required physical share certificates. However, technological advancements in the financial space have brought better alternatives, including the Demat account. Besides the inconvenience, holding physical shares carries risks such as loss, theft, or damage of certificates. On the other hand, shares in a Demat account are stored digitally, taking care of all the risks associated with physical certificates. As per regulations, the Securities and Exchange Board of India (SEBI) has mandated the electronic share trading process, necessitating conversion to a demat account.
Types of Demat Accounts
- Basic Service Demat Account
- Regular Demat Account
- Corporate Demat Account
Broadly, there are three categories for a Demat account. These include the Basic Service Demat Account (BSDA), Regular Demat Account, and Corporate Demat Account. A BSDA account caters to the needs of small investors with a value of securities less than INR 50,000. A regular account is for standard investors without such a limit. A corporate account is specifically for established corporations. Choosing the right type of Demat account is a subjective matter. It requires learning about the investor's needs, investment size, and the benefits offered by each account type.
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How to Open a Demat Account
The first step to opening a Demat account requires choosing a good Depository Participant (DP), like Religare Broking. It's essential to check the eligibility criteria specified by the DP to open a Demat account. If you match those criteria, the next steps include filling out an application, providing the necessary documents, and paying the required fees. The cost varies among DPs and includes account opening charges, annual maintenance charges, and transaction fees.
How to Convert Physical Share to Demat Account
Many people wonder how to convert physical share to Demat account because it's highly convenient. You can even trade using your mobile phones. The first step in this process requires filling out a Dematerialization Request Form (DRF) and submitting it along with original share certificates to your DP. Once the verification is done, the physical shares will be discarded, and an equivalent number of shares will be credited to your zero brokerage demat account. The process usually takes 2-3 weeks. However, it can vary based on the policies of the depository participant. Depending on the DP you choose, it can be easy or difficult to convert physical shares to demat form.
Benefits of Holding Shares in Demat Form
There are numerous benefits of holding shares in a demat form.
Demat shares offer convenience as transactions can be conducted from anywhere. This form reduces paperwork, eliminates the risk of physical damage, and lowers transaction costs. With enhanced transparency and security, investors can monitor their holdings regularly. Faster transactions enable swift trading, and corporate actions like bonuses and dividends are automatically updated in the account.
Risks of Holding Shares in Demat Form
There are some risks associated with holding shares in a Demat account.
1. Account Hacking and Fraud
Everything has some disadvantages, and so does a Demat account. With digitalisation comes the risk of cybercrime. Hackers may obtain unauthorised access to your Demat account and make illegal transactions. Therefore, it's crucial to ensure that the depository participant has robust security measures in place.
2. Technical Issues and System Failure
In some cases, you may face technical glitches or system failures that could prevent you from accessing your account or performing transactions. While these scenarios rarely happen, they can still cause inconvenience, especially during volatile market conditions.
3. Mismanagement by Depository Participant
There's a risk of misconduct or mismanagement by the depository participant. Therefore, it's essential to choose a reputable and trustworthy DP. Regular monitoring and reviewing of account statements can help detect any discrepancies early on
Recommended Read: Advantages of Opening a Demat Account Online
Conclusion
Owning a Demat account is a must for trading securities in the financial space today. There are tons of benefits to owning a Demat account. Therefore, most people try to convert physical shares to Demat account. The transition from physical shares to demat form is a legal requirement and a strategic move which can enhance your investment experience. Choosing the right DP is a must for a swift transition. Convert physical shares to Demat form with Religare Broking today!
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