One adaptation of the latest technologies by India was when in 1996, dematerialization was adopted by SEBI for all the securities transactions in India. Let us look at dematerialization in more detail.
What Dematerialisation means
Earlier the shares of a particular company used to be represented in the form of a physical certificate. With the dawn of new technology, these physical shares are now converted into digitally transferable shares. This is referred to as Dematerialization.
The place where these dematerialized shares are stored is called a dematerialization account. It is abbreviated as a Demat account for everyday use.
Demat account opening process
To begin with, you need to choose a broker to open Demat account. Do your research about the expenses charged and benefits given by different brokers. Then go to the chosen broker’s site/mobile application to open trading account online and start your registration process. For registration, your initial step will be to fill the web-based or physical application and submit it along with your documents for confirmation. These documents include your PAN card, identity evidence, for example, Aadhar card or Passport, your photo and an examined duplicate of your signature, which should coordinate with your mark on the PAN card.
Once the documents are checked, there will be a KYC (Know Your Customer) process. In this process, you must go through an In-Person Verification (IPV) interaction or eKYC measure through Aadhaar number, OTP, and a recorded video with the statement given by the broker. Meanwhile, you will likewise have to choose your depository participant where your online Demat account is actually opened. You can choose either NSDL or CDSL, which are the two depositories enrolled in India for Demat services. You are also required to accept all the terms and conditions of the broker.
Further, you need to specify the kinds of trading you are keen on. It may be Margin trading, Delivery Trading (typical trading as known most commonly), Short sell (usually suggested for Experts), Intraday (where purchasing and selling happen in the same session), BTST (Buy Today Sell Tomorrow), STBT (Sell Today Buy Tomorrow), Futures and Options, Derivative Trading, Currency Trading, Commodity exchanging, Crypto exchanging etc. After completing these steps, your Demat and exchanging records will be effectively opened, and you will receive your DP ID, BO (Beneficiary Owner) ID, login credentials, and different insights about your records.
An investor proposing to dematerialise its shares or other securities must have a Demat account with a DP. The customer needs to mutilate and give up the physical certificates enrolled in its name to the DP. Subsequent to suggesting NSDL electronically, the DP sends the shares/other securities to the concerned Issuer/R&T specialist. It then informs Issuer/R&T specialists about the dematerialisation request, utilizing the NSDL Depository framework.
In the event that the Issuer/R&T specialist discovers the certificates alright, it registers NSDL as the holder of the securities and imparts the affirmation of the request electronically to NDSL. The investor will be the useful proprietor of these holdings. Once the affirmation request is approved, NSDL is notified by the specialist, and then the shares are credited into the Demat account of the investor.
With the advent of new technologies, the stock markets never failed to adapt to them and exploit their potential. One such case was the adoption of Dematerialization in 1996. Physical shares are now converted into dematerialised shares and are stored electronically in a Demat account. The conversion process of physical shares into electronic dematerialized shares is completed through a Depository Participant depending upon where your Demat account is registered.