Dematerialisation ('Demat' in short form) signifies
conversion of a share certificate from its present physical
form to electronic form for the same number of holding.
It is a direct application of scope provided by the
tremendous progress made in the area of Information
Technology whereby voluminous and cumbersome paper work
involved in the scrip based system is eliminated.
It offers scope for paperless trading through
state-of-the-art technology, whereby share transactions and
transfers are processed electronically without involving any
share certificate or transfer deed after the share
certificates have been converted from physical form to
Demat attempts to avoid the time consuming and complex
process of getting shares transferred in the name of buyers
as well its inherent problems of bad deliveries, delay in
processing/fraudulent interception in postal transit, etc.
The transaction charges associated with a demat account are
significantly lesser than its physical counterpart because
of not having to pay any stamp duties.
The largest advantage of having an electronic medium is the
ability to make online investments and sell any number of
shares according to your convenience. You can even sell one
share if that is what you deem necessary.
Dematerialisation of shares is optional and an investor can
still hold shares in physical form. However, as per the
directions of SEBI, he/she has to demat the shares if he/she
wishes to sell the same. Similarly, if an investor purchases
shares, he/she will get delivery of the shares in demat
The Depositories Act, 1996 has been enacted to regulate the
matters related and incidental to the operation of
Depositories and demat operations. Two Depositories are in
operation - National Securities Depository Limited (NSDL)
and Central Depository Services Limited (CDSL).