Difference between Dematerialisation and Rematerialisation
Recently, the Securities and Exchange Board of India (SEBI) has mandated that all securities be issued in a dematerialised form. It has also made it mandatory for traders to possess their securities in a demat form if they wish to sell them through the stock exchanges. However, as of now, traders are also allowed to convert their dematerialised securities back to their physical form through the process of rematerialisation.
If you’re a trader getting into the intricate world of the securities market, then it is important for you to know what dematerialisation and rematerialisation of shares entail, and how different they are from one another.
What is dematerialisation?
The process of converting securities such as shares and debentures held in the physical form to the electronic format is known as dematerialisation. Upon converting securities into the digital form, they can be stored in a demat account for safekeeping. Also, only by dematerialising physical shares and securities can investors sell them through the stock exchanges.
What is rematerialisation?
The process of converting dematerialised securities such as shares and debentures back into their physical form is known as rematerialisation. Investors who have their securities in the demat form can choose to convert them to their physical form by submitting a Rematerialisation Request Form (RRF) with their Depository Participant (DP).
Difference between dematerialisation and rematerialisation
Now that you’re aware of what dematerialisation and rematerialisation of shares denote, let’s take a look at some of the key differences between the two.
|It is the process of conversion of securities existing in the physical form to an electronic form.||It is the process of conversion of securities in the electronic form back to a physical form.|
|The process of dematerialisation is quick and easy.||The process of rematerialisation takes quite a bit of time.|
|Shares that are dematerialised don’t have any distinct numbers.||Shares that have been rematerialised will have distinct numbers.|
|The depository participant is responsible for maintaining your account.||The company that issues the shares is responsible for maintaining your account.|
|You’re required to pay annual maintenance charges for holding dematerialised securities in your demat account.||You don’t have to pay any maintenance charges for holding rematerialised securities.|
|Dematerialised securities can be freely sold through the stock exchanges at any point in time.||Securities sent for Rematerialisation cannot be sold/bought through the stock exchanges.|
|There’s no threat of fraud, theft, misplacement, or loss of shares that have been dematerialised.||There’s always the risk of fraud, theft, misplacement, or loss with rematerialised securities.|
This should give you more clarity about the concepts of dematerialisation and rematerialisation. Holding your shares in the dematerialised form is more beneficial than having them in the physical form since you can sell demat securities on stock exchanges whenever you want.
Also, with dematerialised shares, you don’t have to worry about losing your securities or being a victim of fraud. So, if you possess any securities in the physical form, it may be a good idea to get them converted into the demat form right away.