Dematerialization and Rematerialization are the procedures employed in changing securities from physical form to electronic form. The knowledge about these methods can be helpful for efficient management of the securities in the present depository system.
What are Dematerialization and Rematerialization?
Dematerialization is the method through which the physical share certificates are changed into electronic holdings maintained in a demat account.
Rematerialization is the procedure where the securities in electronic form are converted to physical certificates.
These methods allow the investors to hold securities in the desired format subject to the procedure of depository.
Process of Dematerialization (Documents and Timelines)
Dematerialization is the process through which the physical share certificates are converted to electronic holdings maintained in a demat account. Usually, the investors are required to submit a Dematerialization Request Form (DRF) along with the physical share certificates to the Depository Participant (DP). The processing time may vary based on the issuer, Registrar and Transfer Agent (RTA) and intermediary.
Step-by-step Guide
Step 1 – Defacing Certificates
The physical share certificates are marked with the words “Surrendered for Dematerialization” before submitting it to the Depository Participant.
Step 2 – Filling out the Demat Request Form (DRF)
The investor is required to fill the Demat Request Form (DRF) with the following details:
- Name of the company
- ISIN of the security
- Number of shares proposed for dematerialization
The filled out DRF is submitted to the Depository Participant along with the physical share certificates.
Step 3 – Verification by the Depository Participant
Depository Participant verifies the submitted documents and physical certificates against the demat account records of the investor. After verification, the DP will raise an electronic request through the depository system and forward the relevant documents to the RTA.
Step 4 – Verification by the RTA
The RTA will verify the physical certificates, relevant documents and the electronic request sent through the depository system. Once the verification is done, the request may be approved for dematerialization.
Step 5 – Credit of Electronic Securities
Once the request is approved by the RTA, the respective securities will be credited to the demat account of the investor through the depository system.
Process of Rematerialization
Rematerialization is the procedure through which the securities in electronic form are converted to physical certificates. Though the electronic holdings are used by most of the investors, some investors may choose rematerialization based on the individual requirements and intermediary practices.
Step-by-step Guide
Step 1 – Filling out Remat Request Form (RRF)
The investors who are opting for the rematerialization are required to fill the Remat Request Form (RRF) with the following details:
- Client ID
- Demat account details
- ISIN of the security
- Number of securities proposed for rematerialization
The filled out form should be submitted to the Depository Participant.
Step 2 – Placing Hold on Securities
Upon receipt of the rematerialization request, the Depository Participant may put the hold on the specified securities during the processing.
Step 3 – Submission of Electronic Request
The Depository Participant will forward the rematerialization request through the depository system. Supporting documents may also be submitted to the RTA.
Step 4 – Issue of Physical Certificates
Based on the verification, the RTA will issue physical certificates in accordance with the procedure and dispatch it to the address of the investor.
Step 5 – Updating of Depository Records
Depository records are updated once the rematerialization process is completed.
Why Would an Investor Opt for Rematerialization?
There may be several reasons due to which certain investors would opt for rematerialization.
Factors Influencing Rematerialization Choice
- Estate Planning Consideration
- Family Arrangement
- Requirement concerning certain securities
- Personal preference of the investor
- Specific procedures of the intermediary
How to Fill out Remat Request Form (RRF)?
To fill out an RRF, the investors need the following information:
- Demat account number
- Client ID
- ISIN of the company
- Number of securities proposed for rematerialization
The form should be signed by all the account holders before submission to the Depository Participant.
Key Difference between Dematerialization and Rematerialization
Understanding the difference between dematerialization and rematerialization is important for making informed decisions regarding the method of holding securities. These methods differ in the process involved, holding format, transfer etc.
Comparison Chart
| Feature | Dematerialization | Rematerialization |
|---|---|---|
| Direction | Physical to Electronic | Electronic to Physical |
| Required Form | Demat Request Form (DRF) | Remat Request Form (RRF) |
| Holding Format | Electronic | Physical |
| Transfer | Allows for Electronic Transaction | Requires Conversion |
| Charges | Subject to fee structure of intermediary | Subject to fee structure of intermediary |
| Risk | Lower Risk of Handling Physical Securities | Consideration of physical Securities |
| Process | Through DP, Depository and RTA | Through DP, Depository and RTA |
FAQs
How long does dematerialization take?
The processing time will vary from issuer, RTA, and Depository Participant. The investors should verify the expected time frame with their intermediary.
Can Securities be rematerialized after dematerialization?
Subject to procedures and intermediary requirement, investors can submit the rematerialization request for eligible securities.
Is rematerialization frequently used?
Most of the investors prefer electronic holdings in the depository system but rematerialization is still available for eligible securities.
Conclusion
Dematerialization and rematerialization are the established methods in the securities market ecosystem. Understanding the process, documentation and intermediary process may assist the investors in holding securities efficiently.
Disclaimer
This article is intended only for informational and educational purpose. The processing time, documentation requirement, intermediary practice and operational procedure may vary in light of regulations, issuer requirement and depository guideline.
