even a passing interest in the financial markets is familiar with the term
demat. Have you ever pondered what it actually means? The term "demat"
refers to a dematerialized account, which is derived from the concept of
dematerialization. Rematerialization is another commonly used term, which is
often used in the context of markets. So, what exactly do the two terms mean,
and how do they differ?
of converting physical debentures and share certificates into electronic
form is known as dematerialization.
reduces the risk associated with physically holding shares or debentures.
Depositories such as the National Securities Depository Ltd (NSDL) and the
Central Depository Services Ltd hold your shares in electronic format (CDSL).
of dematerialization is that it allows for quick and smooth transactions. Any
transaction can be completed on your smart devices, including your smartphone.
Any transaction does not require a personal visit to the broker. A
dematerialized account also eliminates the dangers associated with physical
holding, such as forgery, damages, or theft.
securities, such as mutual funds, bonds, and exchange-traded funds, can also be
held in a dematerialized format. For the dematerialized holding of your shares,
there is a maintenance fee. Any benefits you receive, such as refunds,
dividends, or interest, are deposited immediately into your demat account.
who has already converted his or her shares or securities to electronic form
and now wishes to convert them back to physical form can do so through the
is chosen by people who want to avoid demat account maintenance fees. To
convert physical certificates into electronic shares or securities, you need to
fill out a Remat Request Form (RRF) and contact a Depository Participant (DP).
evaluate some differences between Dematerialization and Rematerialization
Rematerialization, is the process
by which an investor who has previously converted shares or securities to a
digital or electronic format now wishes to convert those shares to a physical
one. On the other hand, Dematerialization is the exact opposite of this
process. The major distinction between demat and remat shares is that demat
shares are paperless, but remat shares need physical holding of shares.
The investor would need to fill out
a remat request form and pay a personal visit to the DP or depository
participant in order to get electronically held shares and securities back into
a physical format. While dematerialised shares lack a unique number for
identification, rematerialised shares do have a unique number.
All transactions involving shares
will take place physically once they have been rematerialized. Physical
certificates have no maintenance fees, but the process is time consuming, and
there is always the possibility of fraud, damage, or theft when holding share
certificates in your hands. The company is responsible for keeping physical
shares and not the depository participant.
Clearly, there are numerous
advantages to dematerialization for a shareholder. Because consumers can trade
or invest while on the road, the simplified internet method encourages more
people to do so. Rematerialization, on the other hand, can be a lengthy and
time-consuming process. Rematerialization is an option for investors who want
to avoid paying maintenance fees.
can choose between dematerialized and rematerialized methods of owning shares, however
demat accounts are becoming more popular simply because they are easier to
manage and the average investor has more confidence in transacting in this
paperless and smooth manner.
visits and careful storing of share certificates may be required if you go the
remat option. It may be a simpler approach to open a trading account and start
your journey into the markets if you are a beginner who intends to take up