holding of shares in your account electronically. This takes about 15 days from the dateof request. Electronic holdings can be converted back into certificates, if so desired, in asimilar fashion as that for dematerialization.
Benefits of Demat:
In the depository system, the ownership and transfer of securities takes place by means of electronic book entries. At the outset, this system rids the capital market of the dangersrelated to handling of paper. NSDL provides numerous direct and indirect benefits, like:
Elimination of bad deliveries-
In the depository environment, once holdings of an investor are dematerialized, thequestion of bad delivery does not arise i.e. they cannot be held "under objection".Statistically, in the physical environment, about 20% of delivered stock constitutes baddeliveries. Of these, about 1% is ultimately absorbed by the system as bad delivery cost.Rectification of objection usually involves extensive follow up by the investor. Also, theinvestor cannot sell the securities till they are registered. This means that in the physicalenvironment, every fifth person taking delivery of stock gets securities, the genuinenessto which there is a doubt whereas he parts with genuine funds
Elimination of all risks associated with physical certificates-
Dealing in physical securities have associated security risks of theft of stocks, mutilationof certificates, loss of certificates during movements through and from the registrars, thusexposing the investor to the cost of obtaining duplicate certificates and advertisements,etc. This problem does not arise in the depository environmentNo stamp duty for transfer of equity instruments & units of mutual funds in thedepository(In case of physical shares, stamp duty of 0.5% is payable on transfer of shares).
Immediate transfer and registration of securities –
In the depository environment, once the securities are credited to the investors account on pay out, he becomes the legal owner of the securities. There is no further need to send itto the company's registrar for registration. Having purchased securities in the physicalenvironment, the investor has to send it to the company's registrar so that the change of ownership can be registered. This process usually takes around three to four months andis rarely completed within the statutory framework of two months thus exposing theinvestor to opportunity cost of delay in transfer and to risk of loss in transit. To overcomethis, the normally accepted practice is to hold the securities in street names i.e. not toregister the change of ownership. However, if the investors miss a book closure the3