Difference Between Dematerialisation And Rematerialisation: Key Differences

Difference Between Dematerialisation And Rematerialisation: Key Differences

Dematerialisation is the process of converting tangible securities into digital ones. In other words, it involves replacing electronic records with physical certifications. A depository, which serves as an intermediary between the investor and the business whose shares are being dematerialized, often accelerates the dematerialisation process.

Rematerialisation refers to the process of transforming digital securities back into their physical form. This process is less common than dematerialisation because most investors prefer to hold securities in electronic form due to their convenience and security. The investor must submit a dematerialisation request form (DRF) to their DP along with details on the securities they want to rematerialise to start the dematerialisation process.

Dematerialisation and rematerialisation are two sides of the same coin. Differences between dematerialisation & rematerialisation are explained as follows:

Rematerialisation refers to the process of transforming digital securities back into physical form. This process is less common than dematerialisation because most investors prefer to hold securities in electronic form due to their convenience and security. The investor must submit a dematerialisation request form (DRF) to their DP along with details on the securities they want to rematerialise to start the dematerialisation process.

Dematerialisation and Rematerialisation in Various Industries

In several sectors, including banking and financial services, trading and the stock market, insurance, and real estate, dematerialisation and rematerialisation are crucial. Within the banking and financial services industry, dematerialisation expedites transactions, improves consumer convenience, and allows for the safe storage and movement of financial assets. Dematerialisation facilitates speedier settlement times, more market liquidity, and more effective trading in the stock market. By digitising policy paperwork and enabling faster claims processing, dematerialisation benefits insurance businesses. Dematerialisation lowers fraud, increases transparency, and streamlines property transactions in the real estate industry. Rematerialisation offers investors the same freedom, enabling them to keep tangible certificates according to their preferences.

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Table of Content

  1. Dematerialisation and Rematerialisation in Various Industries
  2. Difference between Dematerialisation and Rematerialisation
  3. Challenges faced between Dematerialization and Rematerialisation
  4. What is the Dematerialisation Process? 
  5. What is the Rematerialisation process?
  6. Step By Step Guide For Dematerialisation Of Shares and Securities 
  7. How to Sell and Buy Dematerialised Securities?

Difference between Dematerialisation and Rematerialisation

Dematerialisation is a simple process of converting physical certificates into electronic format, with minimal maintenance costs and lower security threats. It is easier and more transparent, while rematerialisation involves converting digital securities back into physical certificates, with higher security threats and company authority.

AspectDematerialisationRematerialisation
MeaningConverting physical share certificates and debentures into electronic format.Converting securities from digital format into physical certificates.
Convenience of ProcessEasy and comprehensive.Difficult and cumbersome.
Ease of TradingSmooth, transparent, and straightforward.All transactions need to be conducted physically, in the required locations.
Costs of MaintenanceMinimal maintenance charges.Do not require a maintenance cost.
SecurityLower threats.Higher threats.
Authority of AccountRests with the depository participant.Lies with the company.

Challenges faced between Dematerialization and Rematerialisation

Adopting dematerialization and rematerialisation comes with a number of difficulties as well. The requirement for a strong infrastructure, safe electronic systems, and defence against cyberattacks are examples of technological problems. Resolving any anomalies throughout the dematerialisation or rematerialisation process, assuring smooth market participant integration, and educating investors are all examples of operational hurdles. Legal and regulatory issues include adhering to securities regulations, meeting paperwork needs, and settling disagreements over the rightful owner or validity of tangible or digital assets.

What is the Dematerialisation Process? 

Here is the process of Dematerialisation:

  • The Dematerialisation process commences with the initiation of a Demat account.
  • To open a Demat account, one must first select a Depository Participant (DP) that provides Demat services.
  • In order to convert physical shares into electronic/Demat form, a Dematerialisation Request Form (DRF) must be completed.
  • The entire Dematerialisation process typically takes 15 to 30 days from the time the Dematerialisation request is submitted.
  • Understanding the process of opening a Demat account is crucial, as it is a prerequisite for Dematerialisation.

What is the Rematerialisation process?

Here is the process of Rematerialisation:

  • The Depository Participant (DP) should provide Rematerialisation Request Forms (RRF) to clients.
  • The DPM will generate a Remat Request Number (RRN) which must be recorded on the RRF. An authorised person, other than the one who entered the RRF details in DPM, should verify the RRN details and authorise the request to the depository.
  • The DP must complete the authorization of the RRF and forward it to the issuer or its Registrar & Transfer Agent (R&T agent) for rematerialisation within seven days of acceptance.
  • Upon receiving confirmation of the debit entry in DPM, the DP should notify the client accordingly.

Step By Step Guide For Dematerialisation Of Shares and Securities 

After understanding dematerialisation and rematerialisation distinguish between them. Let’s understand the step by step guide for the dematerialisation of shares and securities. SEBI has mandated that physical shares be converted into electronic form through dematerialisation, which requires the completion of a Dematerialisation Request Form (DRF).

  • Step 1: Open a trading and Demat account with an online Depository Participant. Once all the required fields have been filled out, attach the share certificates and submit the DRF. Make sure to note on each share certificate that it was surrendered for dematerialisation.
  • Step 2: With the provided sage certificates, the Depository Participant will forward your request for dematerialisation to the appropriate depository, transfer agents, and registrars.
  • Step 3: The investor's Demat account will display all the shares that were submitted as electronic share certificates after the registrar has confirmed it. The procedure might take a week to three months.

How to Sell and Buy Dematerialised Securities?

In reality, the method for purchasing and selling dematerialised securities is the same as the process for doing so with physical securities. Below is a quick explanation of how buying and selling works.

Buying Dematerialised Securities

  • Start by selecting a reputable broker to facilitate the transaction.
  • After the purchase, the broker receives the securities in their account on the same day.
  • The broker then contacts the Depository Participant (DP) to initiate the process of debiting their account and crediting the investor's account.

Selling Dematerialised Securities

  • You have the option to sell through a broker at any of the stock exchanges linked to the National Securities Depository Limited (NSDL).
  • The DP should be notified with instructions to debit the Beneficial Owner (BO) account and credit the broker's account.
  • The broker is responsible for instructing the DP to deliver the securities to the clearing corporation, utilising the provided instruction slips.
  • Following the sale, the broker receives payment from the stock exchange, while the seller receives the proceeds from the sale of the securities.

Conclusion
Dematerialisation is a more feasible and efficient process for investors in the Indian market. It provides greater security and transparency, and the possibility of physical certifications being lost or damaged is eliminated. Rematerialisation, on the other hand, is a time-consuming, expensive process that has a larger risk of physical certificate loss, theft, or damage. Dematerialisation has reduced the possibility of fraud and forgery while allowing many new traders and small investors to enter the stock market. Finally, use the reliable stock market app to start your trading journey.  

Dematerialisation vs Rematerialisation FAQs

Dematerialisation is a faster process than Rematerialisation as it is based on the internet and technology.

Dematerialisation streamlines trading and ensures security by eliminating the need for physical certificates. Rematerialisation, on the contrary, is useful when an investor wishes to hold physical certificates for any specific reason.

Dematerialisation offers advantages like ease of trading, reduced paperwork, lower risk of loss or theft, and faster settlement times. It also allows for convenient monitoring of investments through electronic statements.

Yes, you can choose to rematerialize your electronic securities back into physical form if required. This process is called rematerialisation and can be initiated through your Depository Participant (DP) by filling the appropriate form.

Yes, there may be nominal charges associated with both dematerialisation and rematerialisation. These charges vary by Depository Participant (DP) and are typically outlined in the fee schedule provided by the DP. It's advisable to check with your DP for the specific costs of dematerialisation and rematerialisation.