What is Dematerialization? Know the Process


As soon as the advent of electronic technology became a norm and digital account keeping gained significant ground, there was a mushrooming of the digital outlets that allowed the trading domain to come at par with the latest trends in the global domain. In the earlier times, when maintenance of ledgers, book-keeping, and records, etc. was a hefty affair, the processes involved while working on something as detailed as share trading were very much detailed and bulky. For every single operation, the documentation involved was huge and the complexity of the process was tremendous, so much so that many new traders actually felt discouraged from all this. 

Why was dematerialization needed?

However, this is exactly when the commercial processes underwent a transformation and it was finally decided that the overall commercialization has to be as per the convenience of the ordinary investors. These were the times when the nation’s economy began to open up and disinvestment became a norm. The shift from the erstwhile processes gave a significant impetus to the newest reforms and investment on global lines was encouraged.

With this, a consequent need was felt for streamlining the processes on global lines so that investors here could also invest with ease and accountability. Unlike earlier times, such a turn increased the levels of transparency and accountability and at the same time, the area of access was increased manifold for everyone involved in this domain. As a result of this, the ease of operations increased and many such concepts, such as a “dematerialized” account or in short, a Demat account came into prominence that has gained a significant foothold over a period of time.  

Dematerialization of securities:

Dematerialization is the procedure that allows for the maintenance and upkeep of securities in electronic format. What this essentially means is that the physical securities like, share declarations, certificates, documents etc. are maintained as electronic documents, which can be accessed by the shareholder as per his/her convenience at any given time. This allows for real-time upkeep of documents and records maintenance, which, unlike physical maintenance, is easy and simple to operate.  

Any physical security, such as government security, fund asset, mutual fund etc. is held as per the norms laid out by SEBI and the agencies responsible for this are known as “Depository Participants (DPs)”. These DPs are responsible for the overall allocation of funds as mandated and are governed by laws defining the executive and legislative powers of SEBI.  A Demat account can be opened and operated under the guidelines in line with regulations mandated by SEBI and as such there are two depositories that offer due depository services to eligible citizens and investors. 

In India, NSDL (National Securities Depository Limited) and CDSL (Central Depository Services Limited) are the two major depositories that operate and offer the services for registration and upkeep of dematerialized or Demat accounts.

Benefits of Dematerialization:

  • Given the fact that there may be marked variations in divined policies on account of the variations in the composition of shareholding prospects, the trading objectives may govern the decision of investment. In simple terms, what this means is that ease and convenience of operation forms a very important step towards the realization of ultimate financial goals. A dematerialized account allows for a high degree of simplicity while yielding a significant degree of accountability that allows an investor to keep an easy track of the investment decisions and the various parameters involved therein. 
  • A dematerialized account means that a trader can take investment decisions electronically, without being physically available at all times. This saves time, effort and also allows the trader a significant degree of flexibility when it comes to saving time and resources that can be channeled elsewhere. 
  • With a dematerialized account, the financial decisions become easy and so do the financial activities. There is no requirement of any cumbersome banking operations and documentations. A dematerialized account allows you to conveniently and speedily process the payments and issue transaction instructions as and when you wish.
  • A dematerialized account operation is completely hassle-free and paperless, thereby implying that there is no need for any hefty detailing of operations and processes. Being electronic and paperless, a Demat account allows you to work without facing any errors typically associated with weighty and bulky files and documents. Therefore, the dematerialized account involves ease, precision, accuracy and is completely error-free and a sure-shot mode of share trading. 
  • Because of being paperless, a dematerialized account is easy to maintain and therefore the chances of error or human discrepancy are considerably less. This makes the dematerialized system immune to various malpractices like theft, scam and malicious intent etc. Therefore, the safety and security of transactions are guaranteed at all times. 
  • Tracking of transactions is another parameter where a dematerialized system works best for the investor. All sorts of tracking can be done while sitting at home and with full convenience as and when desirable. There is no need of being physically present anywhere and as such any activity related to tracking and keeping a record related to sharing transaction history etc. can be undertaken very easily in a hassle-free manner.
  • Market collateral value is another advantage of a dematerialized account. This means that any security that has been kept in a Demat account can be used as valued collateral for seeking and receiving a market loan. This means that a dematerialized account can act as a hedge in times of financial issues and can be used as a guarantee for securing monetary benefits as and when required. 

A platform like Tradebulls offers significant advantages in terms of step-by-step guidance for investors so that they can invest after knowing all the pros and cons involved in the entire procedures. The decision of investing in the share market requires a Demat account and the due knowledge of where exactly to invest one’s funds. This is very much essential, given the fact that any kind of potential risk, more so for the new beginners, is unwarranted. This is where the services of a registered and recognized firm kike Tradebulls come to your aid. For further details and to invest today, click on the mentioned link: https://www.tradebulls.in