How To Convert Physical Shares To Demat In 2024 – Forbes Advisor INDIA

Gone are the days when India’s stock market required investors to own physical certificates to buy and sell a company’s shares. The country’s stock market regulator, the Securities and Exchange Board of India (SEBI), mandates stock exchanges to issue shares in a dematerialized format, known as demat.

Here’s a detailed guide if you’re looking for ways to convert your physical share certificates to demat.

How to Convert Physical Shares into Demat

As per SEBI rules, the owner of a physical certificate of shares can convert the unit of stocks into demat to receive or retain its current value in the stock market.

A demat account will help you store the value of your physical shares electronically and transfer the value of shares in rupees to your bank account.

The first step is to open a demat and trading account, and then request the dematerialization of physical shares. Here’s a guide to convert your physical shares to demat.

Open a Demat Account 

A Demat account holds company shares, while a trading account buys or sells shares and transfers the amount into your bank account.

  • Step One: Select a depository participant to open a demat and trading account. A depository participant can be banks, public or foreign financial institutions, financial corporations, custodians, stockbrokers, or clearing corporations. DPs work in tandem with the depository, National Securities Depository Limited  (NSDL) or Central Depository Services India Limited (CDSL), to provide depository services to investors.
  • Step Two: Fill out the demat account opening form and submit all relevant documents required for proof of identity, address, and bank account details. The same documents will fulfill the criteria to open a trading account.
  • Step Three: Sign the Member Client Agreement, which contains details of the rights and duties of the investor and DP.
  • Step Four: You will receive a unique ID and password to access your demat account, which can be linked with your trading account.

Learn more: Best Demat Account in India

Raise a Request for Dematerialization of Physical Shares

Once you have opened a demat account, the next step is to convert your physical shares to demat.

  • Step One: Fill out the DRF Form. You must fill out a dematerialization request form (DRF), which you can receive by visiting the depositor participant’s website. Carefully read the details mentioned in the DRF form. It will ask you for more information like the number of shares certificates, the 12-digit alpha-numeric International Securities Identification Number (ISIN) allotted for the security name of the company that issued the shares, its face value, type of security, etc.

    Remember, there are different types of requests for dematerialization of physical shares from which you can choose. Let’s cite an example of filing a DRF form with HDFC Bank as a depository participant.

  • Part A: This part should be filled out if the share certificate has been registered in your name and you wish to dematerialize the shares in your demat account.
  • Part B: This section should be filled out to transpose (interchange name order of shareholders) your existing share certificates as per the account holding pattern in your demat account.
  • Part C: This is required to transmit and dematerialize the securities in your name in case of the death of a sole or joint holder of the certificate shares.
  • Part D: If you own government securities and want to dematerialize them in your demat account.
  • Step Two: Submission. Attach the physical share certificates and the DRF and submit them to the depository participant.
  • Step Three: Verification and Approval. The DP will verify your request and send it to an appointed registrar, and upon approval, the unit of shares will be transferred to your demat account.

Remember, consider filing separate DRF forms if you own physical shares of different companies.

Documents Required to Convert Physical Share Certificates to Demat

Let’s consider that you don’t have a demat account. You will need to submit documents, including:

  • Passport-size photographs
  • Proof of identity: PAN card, Aadhaar card, passport, voter ID card, or driving license, etc.
  • Proof of address: Ration card, passport, voter ID card, driving license, bank passbook, or electricity bill.
  • Proof of bank account: Name of the bank, account number, or a canceled cheque.

Once you open a demat account, submit the signed and filled DRF form and the original copy of physical shares to the depository participant. 

Charges for Converting Physical Shares to Demat

According to SEBI guidelines for dematerialization, investors are refrained from paying charges towards account opening charges, transaction charges, custody charges, and account closing charges. Remember, converting physical shares to demat charges can vary depending on the depository participants.

Let’s consider HDFC Bank’s tariff sheet to get an overview of charges that investors pay towards:

Advantages of Converting Physical Shares into Demat

Besides the opportunity to trade physical shares, the demat account has numerous advantages.

Security: Demat is a safe and convenient way to hold securities. Unlike physical certificates, it eliminates the risk of shares from damages, loss, counterfeiting, and theft. Only an authorized user can access their demat account.

Easy Accessibility: The digitization of shares also saves you time and effort to buy and sell shares instead of visiting the broker’s office to make the transaction. You can easily access your demat account online, monitor your shares portfolio, access account statements, transfer securities, etc.

Credit Facilities: Financial institutions also provide secured loan facilities against the value of shares in your demat account.

International Trading Facilities: Demat has also helped investors, particularly non-resident Indians (NRIs), to take advantage of trading in Indian stock exchanges from abroad by simply logging into their accounts to buy or sell company stocks.

Nominations: The shares in the demat account will be transferred to the beneficiary in the event of the investor’s untimely death.

Frequently Asked Questions (FAQs)

Can physical shares be converted to demat?

Yes – As per SEBI rules, the owner of a certificate of shares can convert the unit of stocks into a demat or dematerialized form to trade shares digitally.

How long does it take to convert physical shares to demat?

Typically, the depositor participant will take two to three weeks to convert physical shares to demat, provided you submit relevant details in the dematerialization request form (DRF), and original copies of the share certificates.

Are physical shares still valid?

Yes–owning physical shares is still valid. However, you must convert physical share certificates to receive or retain their current value in the stock market.

What is the fee for physical share dematerialization?

The charges for converting physical shares to demat can vary depending on the depository participants. Investors pay for the dematerialization and rematerialization of physical shares, annual account maintenance, and transaction fees for selling shares.

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