What are the advantages of Dematerialisation?
The benefits of dematerialisation are numerous and diverse in concept, so you cannot explain them all in a single word. Here you will get to know some of them. You first need to understand the primary function of dematerialisation.
Table of Contents
What is Dematerialisation?
Dematerialisation is the modernization of document keeping. In this method, the documents of your securities, bonds, and funds are converted into an electronic format. It’s almost like an electronic locker for your documents. You can also buy and sell your investment by clicking on your device.
Document protection is the crucial benefit of dematerialisation. However, there are still many more things that you will appreciate as an investor. Because dematerialisation pros are numerous, you can benefit significantly from them.
Pros of Dematerialisation
Through dematerialisation, Demat accounts enable electronic transactions when stock shares are purchased and sold. The certificates for the user’s stocks and other assets are maintained in a DEMAT account as a mechanism for smooth trades to be conducted. The following are some of the pros of dematerialisation:
- It is less time-consuming than the traditional way of transferring the share bonds or funds in the buyer’s account. It is only a click-transfer process for all the investors.
- It also provides more liquidity for the transfer of shares and securities.
- It is helpful to eliminate corruption in the stock market.
- It makes it easier for investors to keep track of their shares and securities data.
- One of the significant benefits of dematerialisation is that it decreases the risk of delayed transfer in case of an emergency.
As it has already been mentioned, there are many other benefits. Hence, it is a very convenient way to hold your securities, and you will also have control over your shares and securities.
Let’s compare the traditional trading method without dematerialisation for your further understanding. Imagine you have all your documents in physical form, and you somehow damage or lose them. You will have to go through a hectic amount of trouble to regain possession of them. There is no guarantee that you will not damage or lose your documents again.
Now in dematerialized form, you can download your documents, and they are always available on your device, or you can keep them in your mail or on your other file-saving apps. In that way, you can always have your documents in your possession. Even if you lose your phone, you can just re-login into your ID from another device and download them.
But as the world moves forward, you never know that you may or may not have time to be physically present for all the stages of trading. So one of the benefits of dematerialisation of your account is that it will not require you to be physically present for all the documentation and the transaction process for your trading purposes.
Conclusion
You may understand now the advantages of dematerialisation, and its necessity is undeniably increasing. You can think of it as a golden opportunity because it is one of the reasons behind the online method of stock market trading.
Today in India, the numbers of internet users are on the rise. The competition for jobs is illuminating the importance of financial backup. Still, as you may already know, not everyone has the time to opt for traditional ways of trading, which consist of physical documents.
Their job is to keep the records safe from external damage. It can get caused by some of the following-
- Some sort of accident,
- Due to the kids in your house,
- or even the fear of losing them.
Just because of the electronic availability of shares and funds, things like online trading are possible; you can transfer, buy, or even sell the shares. One of the many advantages of dematerialisation is that it makes it easier for you to keep your documents safe and keep track of their performance without constant concern about their physical condition.
Due to the evaluation of information technology and the growing number of traders in India, it was necessary to introduce the online trading method. The dematerialisation of documents plays an essential role in that field.
This generation looks for time-friendly ways of doing things, and dematerialisation is one of the best ways to make the concept of trading easier for them. It has made the way of trading so easy that even students with internships or even freshers with limited earnings have turned into potential investors and are interested in investing because they have the platform on their smartphones, laptop, or computer.
These advantages of dematerialisation can benefit this generation and many other investors who do not have enough time for traditional trading methods.
Frequently Asked Questions (FAQs)
The process of dematerialisation, on average, takes about 30 days, and in some cases, if it exceeds that limit, you’re free to contact your DP about it. And if they don’t respond, you can submit your complaint to the NSDL and CDSL.
As of now, there are no such requirements, but sometimes it may depend on your DP.
Any investor can open an unlimited number of Demat accounts. However, you cannot open multiple Demat accounts with the same DP and pay the separate account maintenance charges, i.e., the AMC for all your Demat accounts.
Yes, the investor can transfer the shares from one Demat account to another by following a simple procedure. You can ask your DP to guide you through it.
You can often look to your DP for all the questions regarding your doubts. They will guide you, listen to your strategies, and advise you. You need to choose a good depository participant who suits your financial goals and has reasonable charges that suit your trading budget the most, and then start trading and investing in the stock market.