Concepts & procedures for demat accounts

Demat accounts are very simple to understand. It's an electronic way for one to store all of his investments (e.g. bonds, shares and mutual fund) in one place. This also allows one to track them easily and safely.

The goals and objectives of a Demat account

Since its inception, the Demat account opening promotion has been aggressively driven by many factors. It is explained below:

1. Demat accounts are able to hold shares electronically, eliminating the possibility of theft, misplacement, or forgery as with physical shares. Demat accounts are designed to make sharing safer.
2. Demat accounts are also designed to simplify operations. It is much easier to transfer shares than it was in the past, with transfers taking only a few hours instead of months. Demat accounts have made it easier and quicker to change an address.
3. Demat accounts are looking to improve their convenience. It eliminates cumbersome processes such as buying and pasting stamps from the share market and restrictions on selling shares of odd lots. The proceses is made easy and clear through this .

The electronic process makes it easier to transact shares, which reduces paperwork and is therefore more cost-effective. Now that we have understood the purpose and meaning of Demat accounts let's take a look into some concepts and processes associated to such accounts.

Transfer, Closure, cum Waiver (TCW)

Individuals can transfer their Demat holdings to another institution free of charge. The Beneficiary Owners' accounts (BO) at the transferor Depository Participant DP and the transferee account DP will be identical if they choose this option. They will need to open a new Demat account in the same name if they want to transfer a joint Demat account.

Procedure

1. The account holder(s) must present the completed form in person to the institution. An authorized signatory of the institution can transfer or close corporate accounts
2. In the presence of an official from DP, all holders must sign the form
3. Each joint holder must sign in front of a bank employee
4. You must submit a stamped and signed copy from the central deposit of the new account where the transfer is being proposed.
5. All unutilized instruction sheets must be canceled and returned
6. It is mandatory to submit and verify the self-attested copy of your identity proof by a bank official.
7. The names and details of Demat account holder on old and new must be identical

Concepts of depository

A depository is an area where all electronic securities are kept centrally. India has two such depository services: the Central Depository Services Limited, (CDSL), and the National Securities Depository Limited. Individuals can access these services through any of the DPs, as per the Depositories Act.

Securities' Dematerialisation

This is where physical certificates can be converted into electronic securities. Investors are required to follow the example of all transactions that are executed electronically.

Procedure of Dematerialization

The DP will review the details and submit the certificate with the Demat Request Form. In approximately 30 days, the dematerialization process is complete.

Dematerialisation Credit

The request is processed by the Registrar or Company upon receipt of the DRF, physical securities, and the DRF. After the request is approved, electronic securities are credited to holders' Demat accounts. Investors who are denied a request for electronic securities must contact the DP to obtain assistance in submitting a new DRF.

Transmission cum Demat

If the investment is held jointly by a deceased investor, the surviving holder/s must submit certificates, the death certificate and the Transmission cum Demat form (to the DP). All surviving holders must match the Demat account.

Transposition cum Demat

To convert the Demat account into an electronic format, a Transposition cum Demat Form must be submitted to the DP if the Demat account names do not match those on the physical certificates.

Re-materialisation

Remat Request Form (RF) is used to convert electronic holdings into physical certificates. All holders must sign the RRF, which will be verified by the DP. It is then sent to the Company/Registrar.

Freezing and de-freezing

By submitting a request at the DP, demat account holders can be granted permission to freeze their accounts. Holders must submit a request to the DP in the format required by the DP in order to defreeze their accounts.

Closure

All holders must sign a request form. Before closing the Demat account, all holdings must be transferred. Close the Demat account if there are pending corporate actions or dematerialisation requests.

Users can begin financial planning by equity investing once they have a good understanding of the different concepts and how Demat accounts work.