How to Convert Physical Shares to Demat Account?

Introduction

There was a time when dealing in the Indian stock market used to be extremely paperwork-intensive. Investors had to keep physical share certificates plus be physically available at stock exchanges to trade. However, this changed with the introduction of online trading and tech-driven platforms. 

The Securities and Exchange Board of India (SEBI) has mandated Dematerialized (Demat) accounts for all trading and investment activities. This move has simplified the process of trading and transferring shares by eliminating the requirement for physical share certificates.

If you still possess physical share certificates but are unsure about the steps to convert them to Demat form, this article is what you need. Let’s see how to convert physical shares to Demat.

Step-by-Step Guide to Convert Physical Shares to Demat Form

Converting your physical shares to Demat simplifies the process of engaging in the securities market. Along with that, it improves security, lowers administrative costs, and ensures faster transactions. 

You do not need to protect dematerialized shares as they are stored electronically. Thus, there is no physical harm or risk of theft. This makes investment administration more efficient and secure.

Now let us see the step-by-step process on how to convert paper shares to Demat. 

1. Opening a Demat Account

The first step in converting physical shares to Demat form is to set up a Demat account. Here's how to do it:

Select a Depository Participant (DP)

A DP serves as a liaison between you and the depository. Banks, brokerage firms, and financial service providers commonly operate as DPs. Ensure that the DP is SEBI-registered like Sharekhan and provides you with a wide range of tools and research for investing and trading.

Fill out the Account Opening Form

Provide your name, address, phone number, email address, financial position, and occupation. You can fill out the form online or by visiting the Sharekhan office.

Sign an Agreement with the DP

You also need to sign an agreement with the Sharekhan. It will specify the standardised terms and conditions of the Demat account, such as fees and brokerage costs. Before signing, make sure you have read and understood it thoroughly.

Submit the Required Documents for Verification

Documents required for opening a demat account to dematerialize physical shares include:

• Identity Proof: Any of PAN card, passport, Aadhaar card

• Address Proof: This may be your utility bills, ration card, rental agreement

• Income Proof: Such as salary slips, tax returns, and 

• Active Bank Account: bank statement or cancelled cheque

Verification of Documents and Unique Demat ID

Sharekhan will verify the submitted documents and the account opening form to ensure authenticity. After verification, you will be assigned a unique Demat account number and ID, crucial for online transactions.

2. Converting Shares to a Demat Form

Once you have set up a Demat account, take the following steps to convert your physical shares to Demat:

Complete and Submit the Dematerialization Request Form (DRF) 

Obtain a DRF from Sharekhan and fill in the required information on the physical share certificates you need to convert. Submit your physical share certificates and the completed DRF, noting "Surrendered for Dematerialization" on each share certificate.

DP Sends a Request to the Registrar and Transfer (R&T) Agent

After you have submitted the DRF, Sharekhan will forward your request, as well as the actual share certificates, to the R&T agent in charge of that particular company’s shares and records. You will be then assigned a registration number. This number will be entered into the DRF and transmitted to the R&T agency. 

Acknowledgement & Credit to the Demat Account

The R&T agent will check the authenticity of the provided documents. They will change your name to the DP's on the share certificates and amend the Register of Members.

Once the process is complete, an acknowledgement will be issued and sent to your email.

The dematerialized shares are then credited to your Demat account.

Cost for Converting Physical Shares

Now that you know how to dematerialize shares, let's see the associated cost.  Converting physical shares to the Demat form incurs specific charges, which vary according to the DP and broker. Here are the common charges you could incur:

• Brokerage fees vary based on the choice of DP selected.

• Transaction fees vary from broker to broker and should be inquired about at the outset.

• Conversion Charges are also involved based on the number of shares and certificates.

Disclaimer: The charges mentioned are subject to changes and may vary depending on the service provider. You should check with your Depository Participant (DP) for their most accurate and up-to-date fees.