InvestorQ : What are the key advantages of holding shares in demat form?
Bhavika Nehru made post

What are the key advantages of holding shares in demat form?

Answer
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sarah Leo answered.
2 years ago


What we talk of demat, there are three facets we need to understand to get a complete 360 degrees perspective of the demat process…
The first step is the dematerialization of physical shares. This is the first phase when the physical shares held are sent to the DP for dematerialization along with the demat request form (DRF). In case the certificates are not in your name, then you can send the share certificates to the DP along with a transfer-cum-demat form.
The second facet is the trading and settlement in demat form. That is the model that exchanges follow today. All trades are executed and settled in demat form only. You buy in demat, sell in demat and the trades get aggregated and settled by the exchange in demat form. This also has important implications for IPO allotments since they are done directly in demat form as credits to your demat account. When you buy shares in the trading account, these shares get credited in demat mode into your trading account on T+2 day. Similarly, when you sell shares in demat mode, then the shares get debited to your demat account on T+1 day.
The third facet of dematerialization is handling the corporate actions and data updates to your demat account. Bonuses and splits are automatically credited to your demat account based on the number of shares held by you on the record date. In the case of dividends, the data on ownership on the record date is downloaded to the registrar and the dividends are automatically credited to the mandated bank account. The demat account is also used to centrally make changes to the customer’s details like address, mobile phone, bank mandate, and signature.
Dematerialization is the process of converting your physical shares into an electronic form as well as trading and settling trades in demat form. It is one of the key pillars of modern capital markets.