How to Convert Physical Shares to Demat Account?

The financial markets have evolved significantly in today’s digital age, making traditional methods of holding and trading securities less common. Physical share certificates, once the primary way to prove ownership of company stocks, are gradually becoming a thing of the past. The convenience, safety, and efficiency of holding shares in electronic form have led many investors to convert physical shares to Demat (Dematerialized) form. This transition not only eliminates the risks associated with handling physical certificates but also helps in the process of trading, transferring, and managing your investments. In this blog, we'll understand how to convert physical shares to Demat, ensuring you stay ahead in the ever-changing world of finance. 

What is Dematerialisation?

Dematerialization, often called Demat, has revolutionised the traditional paper-based trading system. It converts physical share certificates into a digital format, making transactions faster, more secure, and highly efficient. Will further discuss dematerialisation's impact on the stock market and how to transfer physical shares to Demat accounts. 

Steps To Convert Physical Shares Into Demat Shares

Here are the steps to convert physical shares to Demat accounts or electronic shares. 

• Step 1. Open a Demat Account:  If you don't already have a Demat account, open one with a SEBI-registered Depository Participant (DP). This can be done online through platforms like the BlinkX trading app. 
• Step 2. Submit the Demat Request Form (DRF): Visit your DP and fill out the Demat Request Form (DRF). Submit this form along with your physical share certificates. 
• Step 3. Verification and DRN Generation: Your DP will verify the documents and generate a Dematerialisation Registration Number (DRN). These details, along with your share certificates, are then sent to the Registrar and Transfer Agent (RTA) for processing. 
• Step 4. Update in Register of Members: The RTA updates the Register of Members to reflect the shares being Dematerialised.
• Step 5. Credit to Demat Account: Once processed, your Demat account is credited with the electronic shares, completing the conversion process.

After the completion of the physical shares to Demat process, you can check your Demat account balance and verify your holdings on your Demat account online. For any queries, you can connect with your broker and clear your concern.

Why Dematerialisation? Advantages of Dematerialised Shares

The Dematerialisation process serves a crucial purpose - guiding individuals on the conversion of physical shares to Dematerialised form, a mandatory move enforced by SEBI. Once shares are converted to Demat through the opening of a Demat account and following the prescribed process, ownership rights become legally binding. 

This transformative process offers a multitude of advantages once investors grasp how to convert physical shares into Demat: 

• Convenience: Trading and transferring Dematerialized shares is streamlined, bypassing the need for physical handling or extensive paperwork. This enhances the efficiency and transparency of buying and selling shares.
• Enhanced Security: Dematerialisation mitigates the risks of theft or damage often associated with physical share certificates.
• Cost-Efficiency: The process significantly reduces transaction costs by eliminating expenses related to printing and dispatching physical certificates. Additionally, it expedites transaction settlement times.
• Versatility: The shift from physical to dematerialised shares empowers investors with heightened trading and investment flexibility. Now, the buying and selling of even a single share can be executed swiftly within seconds.

Difference Between Dematerialisation and Rematerialisation

Here is the difference between Dematerialisation and rematerialisation:

Documents Required to Convert Physical Shares to Demat

To successfully convert physical shares to Demat, SEBI requires specified papers. The following is a list of documentation needed in India:

• Proof of Identity: Valid photo ID cards like driving licence, voter ID, PAN card, or Aadhaar card.
• Proof of Residence: Documents such as driver's licence, passports, utility bills (electricity, gas, telephone), insurance copy, lease agreements, etc.
• Proof of Financial Statements: Bank passbook or account statement for the last three months.
• Original Physical Share Certificates: They should be in good condition with clearly legible information.
• Duly Filled Dematerialisation Request Form: Separate forms for each company if converting shares from multiple companies.
• Defacement of Physical Share Certificates: Write 'Surrendered for Dematerialisation' on each certificate.
• Acknowledgement Slip: Provided by the DP upon surrendering the physical share certificates. Click here to know about Dematerialisation Request Form.

Disadvantages of Using Physical Share Certificates for Trading of Shares

Comparing the trading of securities held in a Demat account to that of actual share certificates has various drawbacks.  

• Trading or investing with real share certificates can be time-consuming and inconvenient. For investors who live in rural places in particular, it requires the physical delivery of share certificates, which can be expensive and time-consuming.
• Lower Security, Physical share certificates might be misplaced or stolen, costing investors a lot of money. Additionally, there is a security issue because unauthorised individuals could abuse the certificates.
• Due to the high transaction costs associated with producing, shipping, and authenticating actual certificates, trading or investing in them can be pricey.
• Delayed Settlement, because physical delivery and certificate verification take time, transactions involving physical share certificates may not settle right away. Missed trade chances and financial losses may arise from this.
• Lack of Flexibility, the ability of investors to trade shares may be constrained by the possession of actual share certificates. In a market that moves swiftly, it may be challenging to sell or acquire shares quickly or in small amounts.