What is Demat?

Dematerialization or "Demat" is a process whereby your securities like shares, debentures etc, are converted into electronic data and stored in computers by a Depository.

Demat has resulted in the elimination of possible mutilated certificates, lost certificates, postal delays and counterfeit shares. Now it is safe, secure and convenient buying, selling and transacting stocks without suffering endless paperwork and delays. You can convert your securities to electronic format with a Demat Account.

Securities registered in your name are surrendered to depository participant (DP) and these are sent to the respective companies who will cancel them after "Dematerialization" and credit your depository account with the DP. The securities on Dematerialization appear as balances in your depository account. These balances are transferable like physical shares. If at a later date, you wish to have these "demat" securities converted back into paper certificates, the Depository helps you to do this.

Depository functions like a securities bank, where the dematerialized physical securities are traded and held in custody. This facilitates faster, risk free and low cost settlement. Depository is much like a bank and perform many activities that are similar to a bank. Following table compares the two.

Holding a demat account reduces brokerage charges, makes pledging/hypothecation of shares easier, enables quick ownership of securities on settlement resulting in increased liquidity, avoids confusion in the ownership title of securities, and provides easy receipt of public issue allotments.

There are many advantages of holding a demat account. A few important ones' are as below.

Shorter settlements thereby enhancing liquidity
No stamp duty on transfer of securities held in demat form.
No concept of Market Lots.
Change of name, address, dividend mandate, registration of power of attorney, transmission etc. can be effected across companies held in demat form by a single instruction to the DP.
A few features of a Demat account are:
Dematerialisation of Securities
Settlement of Securities traded on the exchange as well as off market transactions
Pledging and Hypothecation of Dematerialised Securities
Electronic credit in public issue
Receipt of non-cash benefits in electronic form

Remat (Rematerialization)
The process of converting your Electronic holding back to physical holding of securities termed as Rematerialiazation.