Know The Advantages of Dematerialisation

Advantages of Dematerialisation

The Indian capital market has witnessed tremendous growth in scale & depth in the last few years as in terms of listed companies, a number of stock exchanges, trade volumes of scrips, and investor population. Indian capital market could break the new ground because of the DEMAT account that facilitates the holdings of shares and securities in electronic form.

The process of converting physical shares into electronic form is termed as Dematerialisation. The digitalized era of computers surpasses the need for shares in certificate form. Dematerialisation/ demat account makes it possible to hold, register and transfer the securities electronically.

In the earlier era, deals were recorded & the transactions were registered on papers. The demat accounts abbreviated the paper-oriented process involved with the ownership, trading, and transfer of securities & introduced electronic bookkeeping which further added automatic & speedy updation.

Today, Online DEMAT account is an inevitable need for investors to trade stocks online. A DEMAT account is similar to a bank account, DEMAT accounts hold shares akin the bank account hold money.

Demat Account has Many Advantages Such As:

1.Abbreviated Paperwork

Handling & Managing share trading online through a Demat account removes the need to use paper-based documents. This brings effectiveness for companies by lessening the administrative hassles, and processing fee.

2. Quick Transfer of Shares

Elimination of paperwork and related steps that could slow down the process of clearing transaction results in faster transactions and also reduces the processing fees while offering higher efficiency in trading.

3. Minimizes Damages At Par

Electronic securities minimized the risk of physical damage as well as cloning of shares into fake ones.

4. Physical Record Handling Gets Settled

Demat account functions electronically & conveniently through a smartphone or computer & offers uninterrupted management of share transactions which averts the need for the investor to be physically present to settle transactions so it ensures the confidentiality and authenticity.

5. All Companies Shares can be Reviewed in a Single Account

The shares that are created through collaboration and consolidation of companies are credited automatically in the DEMAT account.

Certain banks also permit holding of both equity and debt securities in a single account.

6. No Scope of loss of Share Certificate in Transit

The risks pertaining to physical certificates like loss, theft, forgery, and damage are utterly waived out with a DEMAT account.

7. Stamp Duty not Required for the Transfer of Securities in Demat Mode

There is no need for stamp duty for transfer of securities and this pulls down the cost of transaction significantly.

8. Automatic Credit of Non-Cash Benefits in Demat Account

The demat account can also hold other non-cash benefits as received through the third parties.

Read Also: Complete Procedure For Dematerialisation Of Shares Under RTA

9. Notifications Through SMS

Alerts are sent through SMS for all the debit and credit in your demat account.

10. Customer Care Help

Banks also provide dedicated and trained customer care officers to assist you through all the procedures.

11. No Predetermined Limit of Transactions

A demat account holder can buy or sell any amount of shares. While in the case of physical securities, there is a limit on the number of transactions done using the same.

12. Loan Availability

One can opt for the facility of loan against securities like bonds & debentures, present in a DEMAT account as collateral to the lender.

13. No Need to Communicate Individually

As all the transactions occur through the depository participant, so it eradicates the need for the trader to communicate personally with each and every company.

14. No Third Party Involvement

Trading can be done easily & smoothly through computers at any location, this wipes off the need of visiting a broker.

15. Provides Nomination Facility

Providing a nominee is one of the key features of holding a Demat account which permit the investor to grant a right to the nominee to operate the account in his/her absence.

16. Reduces Transaction Costs

Demat account ensures that entitlements are directly credited to the investor’s account, this cuts down the transaction cost.

Benefits of Demat For Different Groups:

Benefits to Investors

  • Trading using a Demat account is indeed a big time-saver, Individual investors can trade online without the need to perform extensive paperwork and visit brokers.
  • Dematerialisation diminish the risk of disorganization such as prolonged settlements and deliveries, thus assuring faster and safer transactions
  • Investors can keep watch over their shares irrespective of place and time, this boosts their interest and participation and hence increases their potential for profits.
  • Demat shares can avail the facility of procurement of loan to investors at a lower interest rate by offering the higher level of liquidity and acceptability of securities in Demat.

Benefits to the Company

  • Electronic delivery of shares by companies brings transparency and efficiency in the trading system by facilitating the abrupt and smart transfer of shares
  • Online trading using a demat account is paperless trading which is advantageous from both an administrative and environmental perspective.
  • Dematerialisation helps in cutting down costs involved in printing and issuance of shares to investors.
  • Demat account helps the company to communicate with the shareholders easily & timely because of minimal dependencies.

Benefit to the Brokers

  • Dematerialisation limits the risk of fraud, theft and fake deliveries which enables Brokers to offer more satisfactory & efficient services.
  • Any time any place online monitoring of shares by investors increases the interest and participation of investors in trading and this elevates their earning potential and profits which in turn benefits the brokers as well.
  • The convenient and rapid transfer of Demat shares boost the confidence of investors, thus increases the level of trust they put in the brokerage service.

The introduction of DEMAT accounts have brought much convenience and benefits for all the individuals and has made the process of investing and trading in the stock market much more guarded and plain sailing for Indian investors.

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