What is Demat Conversion of physical securities into electronic form No distinctive number to securities required as depositing & withdrawing money from a bank without bothering about distinctive no. of currency
Demat-need ? bad deliveries due to signature difference mistakes in completion of transfer deeds tearing and mutilation of securities fake certificates fraudulent interception of certificate in transit transfer stamp duty extra consumption of time by the Companies postal delays and charges etc
Dematerialisation Introduced in India through the enactment of the Depositories Act, 1996 It is not mandatory One may keep its holding partly in physical form and partly in Demat form A select list of securities announced by SEBI can be delivered only in demat form in the stock exchanges connected to NSDL
DEMAT-participants Participants: Investors The Depository ○ NSDL [national securities depository ltd.] ○ CDSIL[central depository of securities india ltd.] The Depository Participants The Issuing Company
Depository a depository is an organisation, which holds the beneficial owners securities in electronic form, through a registered Depository Participant (DP). A depository functions somewhat similar to a commercial bank. To avail of the services offered by a depository, the investor has to open an account with it through a registered DP.
NATIONAL SECURITIES DEPOSITORY LIMITED (NSDL) Established in August 1996 as the first depository in India. This depository promoted by institutions of national stature responsible for economic development of the country has since established a national infrastructure of international standards that handles most of the securities held and settled in dematerialized form in the Indian capital market. NSDL has around 1,23,84,644 investors associated with it currently and has 14,336 service centers all over India
CENTRAL DEPOSITORY OF SERVICES LIMITED (CDSL) CDSL received the certificate of commencement of business from SEBI in February, 1999. All leading stock exchanges like the National Stock Exchange, Calcutta Stock Exchange, Delhi Stock Exchange, The Stock Exchange, Ahmedabad, etc. have established connectivity with CDSL. Currently around 81 lakh investors and 12000 companies have admitted their securities (equities, bonds, debentures, commercial papers), units of mutual funds, certificate of deposits etc. into the CDSL system. CDSL has around 568 Depository Participants (DPs) in around 13000 different locations all over India.
Depository Participant A Depository Participant (DP) is an agent of the depository who is authorised to offer depository services to investors. Financial institutions, banks, custodians and stockbrokers complying with the requirements prescribed by SEBI/ Depositories can be registered as DP.
Investors [BeneficialOwner] Individual Partnership Firm HUF Company “Beneficial Owner” is a person in whose name a demat account is opened with Depository for the purpose of holding securities in the electronic form
DEMATERIALISATION PROCESS Open an account with DP Fill up the Dematerialization Request Form and submit together with share certificate which is to be demat. The DP upon receipt of the shares and the DRF, will issue an acknowledgement and will send an electronic request to the Company/Registrars and Transfer Agents of the Company through the Depository for confirmation of demat.
DP ,then issues an acknowledgement to the investor and afterwards follows the following procedure : (a) Defaces the Share Certificates by putting a rubber stamp "Surrendered for Dematerialization“ and by punching two holes on the name of the company on the Share Certificate. (b)Generates a Demat Request Number(DRN) through his Depository Participant Module (DPM) and fills the same in DRF at the appropriate place. (c)Sends an electronic communication to Depository viz. NSDL or CDSL, as the case maybe, to the effect that so many shares of this company (Identified by ISIN) have been received for dematerialization. (d)Sends the DRF and Share Certificates to the company by courier. The role of DP comes to an end with this but he must send a reminder incase credit of shares is not received in demat account of investors within a month. The depository electronically downloads the particulars of demat request, received from DP and sends to the electronic Registrar of the company so that these shares could be dematerialized.
Separate folios should be created in computer in the names of NSDLand CDSL to which dematerialized shares will be transferred.The particulars mentioned in DRF should be checked from ShareCertificates. This is very much similar to scrutiny of Share Certificatesand Transfer Deed in case of Transfer of shares. However, specialattention should be given that the pattern of holding written on DRF isthe same as the endorsement on Share Certificates.Signatures or shareholders on DRF should be verified from thespecimen signatures as per records of the company. All the jointholders should sign the DRF.The ISIN should be mentioned in the DRF. This, to a certain extent,ensures that the security mentioned in the DRF is the one, which theinvestor intends to dematerialize.The data of all demat requests received viz. DRN, DP-Id, Client-Id,Distinctive Nos. of Shares are entered in computer.After completion of data entry, a checklist containing all the dematrequests is generated which should be checked thoroughly to ensurethat only those shares for which Share Certificates have beenreceived are dematerialized.
Procedure of Demat- for an investor Fill DRF(Demat Submit the DRF Request Form) and Share available with DP Certificates to DP DP would forward Deface the share them to the certificate(s) one issuer/their wants to Registrar & dematerialise by Transfer Agent writing across Investor’s “Surrendered for depository a/c Dematerialisation ” would be credited with the dematerialised securities
The time involved in theprocess Dematerialisation is normally completed within 15 days after the share certificates have reached the issuer/their R&T agent. Thus it will take only a month from the date one hands over shares, to receive Demat Credit.
Trading & Settlement inDematerialised Securities If you are a buyer: Purchase securities in any of the S.E.s(connected to NSDL) through a broker of your choice and make payment to your broker Broker arranges payment to clearing corpo./clearing house of the stock exchange Broker receives cr. in his clearing a/c Broker can directly transfer these securities to your a/c Broker gives instructions to your DP to debit his clearimg a/c and credit your depository a/c. You give instructions to your DP for receiving Cr. If instructions match your a/c with your DP is credited
Trading & Settlement inDematerialised Securities If you are a seller Sell your demat securities in any of the Stock Exchanges linked to NSDL through a broker You give instructions to your DP for Debit of your Depository a/c and Credit of your broker’s clearing member a/c at least 24 hrs i.e.one working day prior to the pay-in date or before the deadline prescribed by your DP On pay in day your broker gives instruction to his DP for delivery to clearing corpo. Broker receives payment from the clearing corpo. You receive the payment accordingly.
Charges Charges are paid through DPs Custody charges: 0.01% p.a.(Rs.10 for every Rs.100,000) of the average market value of securities held in a/c Settlement charges: 0.02% (Rs.20 for every Rs. 100,000)of the market value of the securities being transferred from selling broker to the clearing corpo.of the stock exchange and same charges from clearing corpo.to buying agent Rematerialisation charges of 0.10%(Rs.100 for every Rs.100,000) of the market value of securities or Rs.10,whichever is higher
Other Benefits Allotment directly in Demat form possible, Pledge of Demat holdings possible, Lending/Borrowing of Demat Securities to/from an Authorised intermediary, Freezing of a/c possible Transmission of holdings, Nomination facility
REMATERIALISATION The process of getting the securities in an electronic form, converted back into the physical form is known as Rematerialisation. An investor can rematerialize his shares by filling in a Remat Request Form (RRF).
REMATERIALIZATION PROCESS The client will submit a request to the DP for rematerialisation of holdings in its account. On receipt of the request form, the DP will verify that the form is duly filled in and issue to the client, an acknowledgement slip, signed and stamped. The DP will verify the signature of the client as on the form with the specimen available in its records. If the signatures are different the DP will ensure the identity of the client.• If the form is in order the DP will enter the request details in its DPM (software provided by NSDL to the DP). While entering the details, if it is found that the clients account does not have enough balance, the DP will not entertain the request. The DP will intimate the client that the request cannot be entertained since the client does not have sufficient balance. If there is sufficient balance in the clients account, the DP will enter the request in the DPM and the DPM will generate a Rematerialisation Request Number (RRN).
The RRN so generated is entered in the space provided for the purpose in the rematerialisation request form. Details recorded for the RRN should be verified by a person other than the person who entered the data. The request is then released to the DM by the DP. The DM forwards the request to the Issuer/ R&T agent electronically.• The DP will fill the authorization portion of the request form. While processing the request, the Issuer/ R&T agent may report some objections. Depending on the nature of objection, the Issuer/ R&T agent may reject the request or process it partially, seeking rectification for the remaining, and send an objection memo to the DP. The Issuer/ R&T agent accepts the request for rematerialisation prints and dispatches the certificates to the client and sends electronic confirmation to the DM. The DM downloads this information to the DPM and the status of the rematerialisation request is updated in the DPM. The DP must inform the client about the changes in the client account following the acceptance of the request.