Dematerialisation of shares is simply a conversion of physical certificates of Securities to electronic form
WHAT IS DEMAT ACCOUNT AND HOW IT WORKS?
A demat account is similar to a bank account where shares are stored in dematerialized format with depositories. It is essential for anyone to have demat account to trade in shares online. No paper work is involved in trade and transfer of shares. Each demat account is identified by Unique Identification Number which is used to transfer shares from one account to another
Central Depositories, holds securities in electronic format on behalf of the owner of securities and assists them in trading or transfer of securities. The primary function of Depositories is to transfer securities from one demat account to another upon receipt of request from the holder of such demat account.
Services provided by Depository:
1. Dematerialisation of shares
2. Rematerialisation of shares
3. Transfer of beneficial ownership of securities
4. Other financial services.
There are two depositories in India:
1. The National Securities Depositories Limited (NSDL) and
2. The Central Depository Services Limited (CDSL).
Depository Participants (DPs)
DPs are registered agents of depositories and works as intermediaries between the investors and the depositories. Depositories provide its services only through its agents called Depository Participants and investor need to open a demat account with DPs to avail the services of Depositories.