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Dematerialisation Of Shares & Securities
What is Demat Conversion of physical securities into electronic form n No distinctive number to securities required as depositing & withdrawing money from a bank without bothering about distinctive no. of currency n
Demat-need ? n n n n 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 n It is not mandatory n One may keep its holding partly in physical form and partly in Demat form n A select list of securities announced by SEBI can be delivered only in demat form in the stock exchanges connected to NSDL n
DEMAT-participants n Participants: – Investors – The Depository • NSDL [national securities depository ltd. ] • CDSIL[central depository of securities india ltd. ] – The Depository Participants – The Issuing Company
Investors [Beneficial Owner] Individual n Partnership Firm n HUF n Company n “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
Depository a depository is an organisation, which holds the beneficial owner's securities in electronic form, through a registered Depository Participant (DP). n A depository functions somewhat similar to a commercial bank. n To avail of the services offered by a depository, the investor has to open an account with it through a registered DP. n
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.
Procedure of Dematfor an investor Fill DRF(Demat Request Form) available with DP n Deface the share certificate(s) one wants to dematerialise by writing across “Surrendered for Dematerialisation” n Submit the DRF and Share Certificates to DP n DP would forward them to the issuer/their Registrar & Transfer Agent n Investor’s depository a/c would be credited with the dematerialised securities n
The time involved in the process n 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 in Dematerialised Securities n 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 in Dematerialised Securities n 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 n 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 n Allotment directly in Demat form possible, n Pledge of Demat holdings possible, n Lending/Borrowing of Demat Securities to/from an Authorised intermediary, n Freezing of a/c possible n Transmission of holdings, n Nomination facility