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Difference between Dematerialisation and Rematerialisation

With technological advancements, the stock trading process has simplified over the years. You can open your Demat and trading accounts without any paperwork or worrying about keeping physical certificates. Let us understand what Dematerialisation and rematerialisation processes are in the stock market.

What is Dematerialisation?

Dematerialisation is a process of converting paper-based securities into electronic or digital format. You can hold financial securities in Dematerialised form in something known as a demat account.

Individuals must submit a Dematerialisation Request Form (DRF) to start the conversion process of paper-based securities into the Dematerialised form. Let us elaborate on the process.

Step 1. Open a Demat Account

The first step is to open your Demat account with a stockbroker.

Step 2. Raise a request for the Dematerialisation of securities

  • Connect to your stockbroker to access the Dematerialisation request form (DRF). Fill in the form and submit it duly signed to your broker. Accompany the DRF with the physical share certificate(s) and KYC documents. You need to surrender the physical share certificate. Mention 'Surrendered for Dematerialisation' on each of your physical share certificates.
  • Obtain the acknowledgement from the stockbroker.
  • The broker will process your request basis the receipt of DRF and surrendered shares. The broker forwards the request to the Registrar and Share Transfer Agent (STA). They will also share the physical certificates to the depository.
  • If the DRF is found legitimate, physical share certificates are destroyed, and the same securities will reflect in your Demat account.

What is Rematerialization?

Rematerialisation refers to the conversion process of digital securities into physical certificates. Rematerialized securities cannot be traded on stock exchanges operating online.

This process involves the following steps:

  • An individual must submit the REMAT Request Form (RRF) to their stockbroker to start the Dematerialization process.
  • The broker will then approach the depository and forward the request and form to the Registrar and Transfer (R&T) agents.
  • The Registrar will verify the form and confirm the print of physical certificates of securities.

These are the Dematerialization and rematerialization processes to facilitate investors

Key Differences Between Dematerialisation and Rematerialisation

Feature Dematerialisation Rematerialisation
Definition The process of converting physical securities into electronic form. The process of converting electronic securities into physical form.
Benefits More convenient, secure, and efficient. Can be done if there is a need for physical certificates. Costs There are usually no maintenance charges for dematerialised securities. There may be a fee for rematerialisation.
Restrictions Not all securities can be dematerialised. Rematerialisation cannot be done for all securities.
Process The investor submits a dematerialisation request to their depository participant (DP). The DP then cancels the physical certificates and creates electronic records of the securities in the investor's demat account. The investor submits a rematerialisation request to their DP. The DP then creates physical certificates of the securities and delivers them to the investor.

Other Differences: Dematerialisation vs Rematerialization

Here you can find the difference between Dematerialisation and rematerialisation:

  • Security:

    Regarding security, Dematerialisation in the online trading system ensures the security of financial assets. There is a lesser chance of fake or late deliveries, theft, etc.

  • Convenience:

    Dematerialisation is an easy and transparent process with a SEBI-registered broker. Rematerialization is a cumbersome process.

  • Ease of Trading:

    Dematerialised securities can be easily traded online via your online Demat accounts. Rematerialized securities cannot be traded further.

  • Cost of Maintenance:

    There is no cost to maintain Rematerialized securities because the investor takes responsibility for their securities. On the other hand, Dematerialised securities must be held in a Demat account only with the stockbrokers. Therefore, stockbrokers levy an account maintenance charge (AMC) for their services.

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Frequently Asked Questions (FAQs)

Dematerialisation is the process of converting physical securities into digital format. In contrast, Rematerialization refers to converting digitally held securities into physical form.

Suppose you have old physical share certificates received as inheritance assets, or you just found your lost share certificates. These paper-based securities have not lost their value, but you cannot trade them on the stock exchange. You can complete the Dematerialisation process by opening a Demat account online and indulging in trading activities online.

The basic idea behind Dematerialisation is to ease the process of holding and maintaining financial assets safely. Also, it makes the trading system smooth and cost-effective.

Insurance policies held electronically with an insurance repository are known as Dematerialised policies. Concerning the operational challenges and cost concerns, the Insurance Regulatory Development Authority of India (IRDAI) has instructed all insurance issuers to Dematerialise their existing insurance plans by December 2023.

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