Dematerialisation & Rematerialisation: Meaning and Process

5paisa Research Team Date: 03 Jan, 2022 07:31 PM IST


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What is Dematerialisation?

Demat or Dematerialisation is the procedure of converting physical copies of shares and certificates into digital copies. Initially, investors were provided physical certificates of ownership. The investors were required to keep the physical certificates safe and undamaged. In case the certificate was damaged or lost, it would result in a loss for the investor or beneficiaries. However, with the Depositories Act 1996, new rules were implemented, due to which all unlisted public companies were mandated to issue dematerialised shares only. The dematerialisation of shares helps investors to conduct transactions promptly and securely.

The Process of Dematerialisation

The process of share dematerialization involves 4 parties. These are 

  1. The share issuing company
  2. Depository
  3. Owner or beneficiary
  4. Depository Participant (DP) or brokerage firm

Share issuing company – Any company intending to issue dematerialised shares needs to revise its Article of Association, regulations for company operation, to deal dematerialised shares. After revision of regulations, companies must register with a depository.

Depository – Currently, there are two depositories in India: National Securities Depository Limited (NSDL) and Central Securities Depository Limited (CDSL). The depositories provide companies with a unique 12 digit International Securities Identification Number to identify each share and securities. Most dealings between the company and depository are intermediated by Registrar and Transfer Agents.

Owner or Beneficiary – Under the current rules and regulations, new and old share investors must open a 'Demat Account.' The investor's actions, such as buying and selling exchange traded funds (ETFs), stocks, bonds, and mutual funds, are recorded in the registered account. Investors cannot register for an account on their own directly. Depository participants or brokerage firms register for demat account on behalf of their client (share owner). 

Depository participants (DP) – DP is registered agent of Depositories. They register for demat accounts for their clients after processing their registration form and documents.

Check: How to Open a Demat account

Steps of Dematerialisation

Step 1 - Investors open demat account with the help of a DP

Step 2 -The investor surrenders physical certificates with a 'Dematerialisation Request Form.'

Step 3 -DP begins processing the request form.

Step 4 -Post-processing of request, all submitted physical certificates are destroyed, and shares are sent to the depository.

Step 5 -Depository confirms the Dematerialisation of shares to the depository participant.

Step 6 -Converted shares are credited to the registered demat account.



An investor can opt to rematerialise their shares even after Dematerialisation. Rematerialisation is the process of converting the dematerialised shares back to physical copies of certificates. Some investors opt to rematerialise their share in order to avoid maintenance charges on their demat account. Post-rematerialisation, the investors can conduct transactions physically only.

Process of Rematerialisation

Similar to the process of share dematerialisation, investors are required to fill a Remat Request Form (RRF) with their respective DP. During the process of rematerialisation, investors cannot trade their shares. The process of rematerialisation is conducted in the following way:

Step 1 - Investor contacts their respective DP.

Step 2 - Depository participants provide a Remat Request Form (RRF) to the investor.

Step 3 - After receiving the filled RRF depository participant submits the request to the depository and share issuer and temporarily blocks the investor's account.

Step 4 - After successfully processing the request, the share issuer prints physical certificates and dispatches the certificates after confirming with the depository.

Step 5 - The blocked balance on the account is debited. 

Duration of Process of Dematerialisation and Rematerialisation

The entire process of Demat and Remat both takes about 30 days from the time of submission of the request to processing of the request.

Check: List of Documents required to open a demat account

Things to note for Dematerialisation and Rematerialisation

According to the new rules and regulations, it is mandatory to conduct all transactions through a registered dematerialisation account.

Transactions undertaken through registered dematerialisation account are faster.

Rematerialisation of shares shifts the authority of the account to the share issuing company.

Rematerialised shares do not require a maintenance cost. However, security threats are higher compared to dematerialised shares.

Rematerialization of shares shifts the authority of the account to the share issuing company.

More About Demat Account

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