1. What is Dematrialisation (Demat): Dematrialisation of share is a procedure where shareholder transfers physical form of share certificate into electronics format. For that investors has to open demat account with depository participant.
SEBI established in 1992, its main office is at Mumbai. As per the provision of SEBI, the person who wants to purchase or sell share has to compulsory open Demat account from depositary participant.
2. Requirement of Demat Account (Importance of Demat Account):
(1)Preserve Share Certificate : As share certificate are preserved in electronic form, no need to preserve them in physical form.
(2) No need of Duplicate Share Certificate : When the certificate received in physical form lost, destroyed, torn or damage then to get duplicate share certificate share certificate, the shareholders have to go for long and costly procedure. But in demat account, they don’t have to follow all this procedure. By simply crediting Demat account shares get transferred.
(3) No need of Share Transfer form: Transfer of share is easy after opening Demat account. There is no need of transfer form and signature on it.
(4) No problem of fake or forged signature : There was a problem of fake or forged signature on purchase or sale of physical form of share. This kind of problem does not arise on the transfer of Dematrialised share.
(5) No need of delivery through post departments : The transaction of purchase and sale is done online in Demat account. On sale of share, there will be debit effect in Demat Account and credit effect while purchase of share. Thus, the problem of delay in receiving shares by postal department can be removed.
3. Where Demat Account can be opened?: Dematrialisation of share is a process where investor transfer his physical format of shares into electronic format and keeps with depositary participants account. There are two institution (1) NSDL (National Securities Depositary Ltd.) and (ii) CDSL (Central Depositary Services Ltd.) working as depositary participants in India. These institutions take responsibility to protect shares, bonds and other securities of investors. So, these institutions are also known as security protector agent. The Government banks, Private banks and Other financial institutions open demat account on behalf of these institutions.
4. Procedure of Opening Demat Account : The investors has to contact bank or finanical institute to open Demat account. He has to provide information in the prescribed application form given by the institution. Investor has to submit following documents alonwijh the application form to open account. (1) PAN card (ii) Residential proof (iii) Identity proof (iv) Income Tax Return (v) Passport size photo (vi) Investor has to give client agreement on non-judicial stamp --paper along with application form.