InvestorQ : I am a little uncomfortable with demat shares. What happens if my DP goes bankrupt or decides to leave the Demat business? Will I be in the lurch?
Debbie Mascarenhas made post

I am a little uncomfortable with demat shares. What happens if my DP goes bankrupt or decides to leave the Demat business? Will I be in the lurch?

Answer
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Crowny Pinto answered.
1 year ago


Demat is a lot more than just holding electronic shares. It is a complete eco system that is backing up your electronic holdings. You may recollect that back in 2006 when the SEBI ordered Karvy and Indiabulls to shut down their demat business following the IPO scam; there was a big worry among the investors who had shares with these two DPs. The primary concern was whether all their demat shares will simply evaporate into thin air. That is hardly surprising because in the demat scenario nobody holds share certificates in physical form. All that they have is a holding statement and a transaction statement. Not surprisingly, these investors, many of them sizable investors, were really worried that they had actually lost all their holdings. If that is your thought process, then there is good news for you.

Firstly, you can relax; your dematerialized shares are with NSDL or the CDSL…

This is an interesting aspect for you to know. When you open a demat account, you have to indicate to your DP whether you want to actually open the demat account with the NSDL or CDSL. The National Securities Depository Ltd. (NSDL) and the Central Securities Depository Ltd were (CDSL) were floated by the NSE and the BSE respectively. Both are institutions that are backed by large institutions that are owned by the government and the shares held with the two depositories are protected under SEBI regulations. Your shares are actually held by one of these depositories. The Depository participants (DPs) like Karvy, Motilal Oswal, Angel, ICICI Bank etc are the depository participants who hold and administer these shares in custody on behalf of the NSDL or the CDSL. Hence, for all practical purposes you do not worry about the safety of your shares held with your DP. They are as safe and secure as any asset can be.