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DEPOSITORY AND DEMATERIALISATION

Shares are traditionally held in physical or paper form. This method has its own inherent weaknesses like loss/theft of certificates, forged/fake certificates, cumbersome and time consuming procedure for transfer of shares etc. Therefore, to eliminate these weaknesses, a new system called Depository System has been established. A depository is a system which holds your shares in the form of electronic accounts in the same way a bank holds your money in a savings account. Depository System provides the following advantages to an investor. Your shares cannot be lost or stolen or mutilated. You never need to doubt the genuineness of your shares i.e., whether they are forged or fake. Share transactions like transfer, transmission etc. can be effected immediately. Transaction costs are usually lower than that in the physical segment. There is no risk of bad delivery. Bonus/Rights shares allotted to you will be immediately credited to your account. You will receive the statement of account of your transactions/holdings periodically. When you decide to have your shares in electronic form, you should approach a Depository Participant (DP) who is an agent of the depository and open an account. You should surrender your share certificate in physical form and your DP will arrange to get them sent to and verified by the company and on confirmation credit your account with an equivalent number of shares. This process is known as de-materialisation. You can always reverse this process if you so desire and get your shares reconverted into paper form. This process is known as re-materialisation. Share transactions (like sale or purchase and transfer/transmission etc.) in the electronic form can be effected in a much simpler and faster way. All you need to do is that after confirmation of sales/purchase transaction by your broker, you should approach your DP with a request to debit/credit your account for the transaction. The Depository will immediately arrange to complete the transaction by updating your account. There is no need for separate communication to the company to register the transfer.
Is dematerialization of securities compulsory? According to the Depositories Act, 1996, an investor has the option to hold securities either in physical or electronic form. Part of holding can be in physical form and part in demat form. However, SEBI has notified that settlement of market trades in listed securities should take place only in the demat mode. What type of instruments are available for demat at CDSL? All types of equity/debt instruments viz. Equity shares, Preference Shares, Partly paid shares, Bonds, Debentures, Commercial Papers, Certificates of Deposit, Government Securities (G-SEC) etc. irrespective of whether these instruments are listed / unlisted / privately placed can be dematerialized with CDSL, if they have been admitted with CDSL.

What are the benefits of availing depository services? A safe, convenient way to hold securities; Immediate transfer of securities; No stamp duty on transfer of securities; Elimination of risks associated with physical certificates such as bad delivery, fake securities, Delays in transit, thefts etc. Reduction in paperwork involved in transfer of securities; Reduction in transaction cost; No odd lot problem, even one share can be sold; Change in address recorded with DP gets registered with all companies in one go in which the investor holds securities electronically thereby eliminating the need to correspond with each of them separately; Easy Nomination facility; Smooth Transmission of securities in case of any eventualities.

How do I buy or sell dematerialised securities? The procedure for buying and selling dematerialised shares is similar to the procedure for buying and selling physical shares. The difference lies in the process of delivery (in case of sale) and receipt (in case of purchase) of securities. In case of Purchase The broker will receive the securities in his account on the payout day. The broker will give instruction to its DP to debit his account and credit your account You will give 'Receipt Instruction to DP for receiving credit by filling appropriates form. However you can give standing instruction for credit into your account that will obviate the need of giving Receipt Instruction every time. In case of Sale You will give delivery instruction to DP to debit your account and credit your broker's account. Such instruction should reach to your DP's office Whom do I contact in case of any complaint / problem/ query? In case of any complaint / problem / query you may first contact DP. If DP is unable to solve complaint / problem / query you should approach concerned depository. If you have yet not got redressal/reply you may approach SEBI. One may also approach SEBI directly. I wish to split/consolidate my share certificates into marketable lots. What is the procedure that I should follow? Please forward your share certificates along with a request letter signed by the registered shareholder/s and we shall split/consolidate the share certificates accordingly.