 Materialization - able to be seen, visible.

 Dematerialization – Invisible, can’t touch

 A share is a unit of ownership in a company

 Company divides its capital into units of equal

denomination. Each unit is called a share.

 A person who buys share/shares of the company?

 By acquiring share or shares in the company he/she

becomes one of the owners of the company.

 Dematerialization is a process by which
physical certificates of an investor are
converted into electronic form and credited
to the account of the depository participant.

• Dematted securities do not have any certificate numbers or

distinctive numbers
• Investors can dematerialize only those certificates that are
already registered in their names
 Dematerialized securities (‘Demat’ in short)
are securities that are not on paper and a
certificate to that effect do not exist.

 They exist in the form of entries in the book

of depositories.

 In the demat system, the shares are held in a

electronic form.
A Depository (NSDL & CDSL) is an organisation
like a Central Bank where the securities of a
shareholder are held in the electronic form at
the request of the shareholder through the
medium of a Depository Participant.
• Similar to the brokers who trade on your behalf
in and outside the Stock Exchange; a Depository
Participant (DP) is your representative (agent) in
the depository system providing the link between
the Company and investor.

• Your Depository Participant will maintain your

securities account balances and intimate to you
the status of your holding from time to time.
• According to SEBI guidelines, Financial
Institutions like banks, custodians, stockbrokers
etc. can become participants in the depository.

• While the Depository can be compared to a Bank,

DP is like a branch of your bank with whom you
can have an account.
• The Depository System functions very much
like the banking system.
• A bank holds funds in accounts whereas a
Depository holds securities in accounts for its
clients.
• A Bank transfers funds between accounts
whereas a Depository transfers securities
between accounts.
• Both the Banks and the Depository are
accountable for the safe keeping of funds and
securities respectively.
The Demat account number is quoted for all
transactions.
 Access to the demat account requires :

 an internet password and

 a transaction password as well as initiating

and confirming transfers or purchases of
securities.
 Indian capital market has seen exceptional boom in its activity in the last 15 years in
terms of

• number of stock exchanges,

• listed companies,
• trade volumes,
• market intermediaries,
• investor population, etc.
However, increase in the activity has brought numerous problems
 large volume
 paper based trading,
 clearing and settlement.
 Under Section 68 B of the Companies Act,
inserted by the Companies (Amendment) Act,
2000, it is mandated that every Initial Public
Offer (IPO) made by a listed company in the
excess of Rs. 10 Crores has to be issued in
dematerialized form by complying with the
requisite provisions of the Depositories Act,
1996.
 shares,
 Scrip’s,
 bonds,
 debentures,
 units of mutual funds,
 commercial paper,
 certificate of deposit,
 American Depository Receipts and Global Depository Receipts
 1. Investors should have a depository account.
2. Securities should be from the eligible list of
securities issued by the depository
3. Securities must be in the name of the account
holders and owned by him.
4. Separate demat requisition form is required for
each issuer company.
5. DRF Dematerialisation Request Form should be
signed by the holders so as to match specimen
signature.
 India has chosen the concept of multi-depositories.

They are registered with SEBI;

1. National Securities Depository Limited (NSDL)

2. Central Depository Service (India) Limited (CDSL)

 Is a public limited company incorporated
under the Companies Act, 1956. Four
renowned institutions participate in it.
 Unit Trust of India (UTI),
 Industrial Development Bank of India (IDBI),
 National Stock Exchange of India (NSE),
 State Bank of India (SBI).
 CDSL

CDSL signed a memorandum of understanding

with NSDL for inter-depository connectivity.

 Presently, more than half the business of

depositories is handled by this agency.
 SEBI has taken various policy initiatives to
popularize the demat concept.
 One of them is delivery of demat shares
compulsorily for institutional investors and
OCBs.
 I have purchased some shares in paper form. Can I
directly give the share certificates to my Depository
Participant for dematting them in my favour?

 How do I get my dividends on dematted shares?

 Will I get the Annual Report after I demat my shares.

 would I be able to attend the AGM?
 What are the chances of any fraud/disputes in
using a demat account?

 Whom should I approach in such cases?

 Can I pledge my shares in demat form for the

purpose of availing any funding/loan.
• How will I know that my Depository Participant
has updated my account after each transaction?

• What happens if I lose share holding statement

or depository pass book?

• Are you restricted to having accounts with only

one depository participant?

• Do you have to keep any minimum balance of

securities in your account?
 First an investor has to approach a DP and fill
up an account opening form.

 The account opening form must be supported

by copies of any one of the approved
documents to serve as proof of identity (POI)
and proof of address (POA) as specified by
SEBI.
 Besides, production of PAN card in original at
the time of opening of account
• open an account with any of the depository
participants.
• fill up the account opening form.
• An account number (client ID) will be allotted after
signing the agreement which defines the rights and
duties of the DP and the investor wishing to open the
account.
• The client ID along with the DP ID gives a unique
identification in the depository system. Any number
of depository accounts can be opened.
• After opening an account with the DP the investor
should surrender the physical certificates held in his
name to a depository participant.
• Depository participant intimates Depository of the request
through the system.
• Depository participant submits the certificates to the registrar of
the Issuer Company.
• Registrar confirms the dematerialisation request from
depository.
• After dematerialising the certificates, Registrar updates accounts
and informs depository of the completion of dematerialisation.
• Depository updates its accounts and informs the depository
participant.
• Depository participant updates the demat account of the
investor.
Firstly we need to check, whether both Demat
account's Depository Participant is same or not
(CDSL or NSDL).
• If both of them are different, then we need an
INTER Depository Slip (Inter DIS).
• If they are same, then we need INTRA
Depository Slip (Intra DIS).
Transfer and settlements have never been easy
as it is under the depository system.
All that is required is an instruction slip:

If you are selling securities then it has to be a

delivery instruction slip.
 If you are purchasing securities it has to be a

receipt instruction slip or one time standing

instructions for credit.
 Axis Bank is a registered member (Depository
Participant) of NSDL.
 Axis Bank has been enrolled as a Depository

Participant by the NSDL - India's first

depository.
 Investors can avail of all the depository-

related services by just opening an account

with NSDL through Axis Bank.
• Transfer of shares and settlements
• Receipt of Corporate Benefits
• Dematerialisation of shares
• Rematerilialisation
• Pledge-Hypothecation
• Freezing or Locking of Accounts
• Speed-e facility
• I-Connect Depository Services
◦ Balance inquiry
◦ Statement of Demat account by fax, phone or email
◦ Transaction details by fax or phone or email
◦ Holding details by fax or phone or email
◦ Overdue details by fax or phone or email
◦ Rejection details by fax or phone or email
◦ Change of PIN.
 I have purchased some shares in paper form. Can I
directly give the share certificates to my Depository
Participant for dematting them in my favour?

 How do I get my dividends on dematted shares?

 Will I get the Annual Report after I demat my shares.

 would I be able to attend the AGM?
 What are the chances of any fraud/disputes in
using a demat account?

 Whom should I approach in such cases?

 Can I pledge my shares in demat form for the

purpose of availing any funding/loan.
• How will I know that my Depository Participant
has updated my account after each transaction?

• What happens if I lose share holding statement

or depository pass book?

• Are you restricted to having accounts with only

one depository participant?

• Do you have to keep any minimum balance of

securities in your account?
 How long would it take my account to be
credited when I submit my shares for
dematerialisation?

 Your account will be credited typically in 15

days.