Dematerialisation vs Rematerialisation: Understanding the Difference

Before 1996, investors held their shares in the form of physical share certificates. With the introduction of a demat account, the holding of the shares changes to electronic mode. Dematerialisation is the process of converting physical shares into digital ones. Still, many investors hold physical shares. If you know someone in your family who still holds a physical share certificate, you can help them with the conversion; we have covered the process of dematerialisation in another blog.

By opting for dematerialisation, you'll ensure that your securities are stored safely and securely. This electronic format enables you to transact swiftly, as the transfer of shares occurs almost instantly. You also reduce the possibility of forgery or theft, as the electronic records are maintained by depositories like the National Securities Depository Limited (NSDL) or the Central Depository Services Limited (CDSL). This system not only streamlines the trading process but also provides you with a clear, real-time view of your investments.

While dematerialisation converts physical certificates into electronic form, rematerialisation is the reverse process. You choose rematerialisation when you need physical share certificates instead of digital records. You might require physical certificates for legal purposes, inheritance matters, or if you are dealing with entities that do not recognise DEMAT accounts. In this case, you request your depository participant (DP) to convert the electronic records back into physical form.

When you undergo rematerialisation, you will have to submit a rematerialisation request form to your DP, along with the necessary details and documentation. The process may take a few days, as your DP verifies your request and ensures that all records match correctly. Once completed, you receive physical share certificates that represent your holdings. This process can be critical if you plan to transfer shares to someone who does not hold a demat account or if you need tangible proof of ownership.

Many customers opt for rematerialisation to save on the cost of maintenance fees. Certain situations may require holding shares in physical form due to specific regulations or corporate needs.

In case you wish to trade further on the stocks that you are holding, it's better to keep them in electronic form, as it gives you the ease of managing your portfolio better. In case you just want to hold the stock for the long term, it could be as a gift for your future generation; you may opt for a physical share certificate. However, keep in mind that as technology advances, the traditional practice of holding physical share certificates is becoming obsolete, unless there is a specific requirement.

Disclaimer: Investors should understand the applicable procedures and regulatory requirements before opting for dematerialisation or rematerialisation of their securities.