The depository concept is similar to the Banking system with the exception that banks handle funds whereas a depository handles securities of the investors. A depository can therefore be conceived of as a “Bank” for securities. 

An investor wishing to utilize the services offered by a depository, has to open an account with the depository through the Depository Participant. This is very similar to opening an account with a bank in order to utilize the banking services. 

The depository system evolved by the National Securities Depositories Limited (NSDL) and Central Depository Services (India) Limited (CDSL) enables investors to overcome all problems related to handling physical certificates. NSDL and CDSL are organizations formed to provide electronic depository facilities for securities traded. The securities of investors are held in electronic form through the medium of Depository Participants.

A depository is an organization where the securities of a shareholder are held in the electronic form at the request of the shareholder through the medium of a depository participant. Depositories will perform the following functions through its various participants. 

a) enable surrender and withdrawal of securities to and from the depository (i.e. dematerialization and re-materialization)

b) maintain investor holdings in the electronic form

c) effect settlement of securities trade on the exchanges 

d) carry out settlement of trades not done on the stock exchanges (i.e. off-market trades)

Similar to the brokers who trade on your behalf in and outside the stock exchanges, a depository participant is a representative (agent) in the depository system. Depository participant will maintain securities account balances and intimate the holder the status of holdings from time to time. According to SEBI guidelines, financial institutions, banks, custodians, stock brokers, etc. can become participants in the depository. Investor will have to obtain statements for his account for securities transactions from DP from time to time.

“Dematerialisation” is a process by which the physical certificates of an investor are taken back by the Company/Registrar and actually destroyed and an equivalent number of securities are credited in the electronic holdings of that investor. 

SEBI, through various circulars issued, with recent one issued on May 07, 2024 vide circular no. SEBI/HO/MIRSD/POD-1/P/CIR/2024/37, has emphasized the mandatory dematerialization of physical shares for processing various service requests, including issuance of duplicate securities certificates, renewal/exchange of securities certificates and transmission or transposition of shares. It mandates dematerialization of shares as held in physical form, as a prerequisite, to process above-mentioned investor service requests.

An investor will have to first open an account with a depository participant and then request for the dematerialisation of his certificates through the depository participant so that the dematerialised holdings can be credited into that account. Re-materialisation is exactly the reverse process of dematerialisation

In order to dematerialize physical share certificate(s), the Member has to fill in a DRF which is available with the DP and submit the same along with physical share certificates to the DP. Separate DRF has to be filled for each ISIN. 

Process of dematerialisation is outlined below:

1. Surrender certificates for dematerialisation to the DP.

2. Upon receipt of the original share certificate, DP defaces the certificate with a remark “received from

dematerialisation” and mentions the Client ID or BO ID of the owner.

1. The DP raises a DRN and intimates the Depository of the request through the system.

2. The DP submits the certificates to the RTA.

3. The Company confirms the dematerialisation request from the Depository.

4. After dematerializing certificates, RTA updates accounts and informs the Depository of the completion of dematerialisation.

1. The Depository updates its accounts and informs the DP.

2. The DP updates the account and informs the Member.

Charges to demat the shares differ from DP to DP and therefore Members are advised to contact their DP. 

The entire process should be completed within 15 days.

“Rematerialisation” is the term used for converting electronic holdings back into certificates. This is done only at the request of the investor.

Yes, to get back the shares in physical form, the accountholder has to fill in the RRF and request the DP for rematerialization of the shares. The process of rematerialization is outlined below:

1. Make a request for rematerialization.

2. The DP intimates the Depository of the request through the system.

3. The Depository confirms rematerialization request to the RTA.

4. The RTA updates accounts and prints certificates.

5. The Depository updates accounts and downloads details to the DP.

6. RTA dispatches certificates to the Member.

If the process of rematerialization takes more than 30 days, please contact the RTA. If it is unable to provide the information, one may send the grievance to the Depository. However, as per the guidance issued by SEBI, shares in physical form cannot be transferred /traded on the stock exchanges.

Benefits of converting securities in the electronic form are: 

• Reduction of risks associated with loss, mutilation, theft and forgery etc.

• The paper work required will be reduced to a minimum, while dealing with securities.

• Greater liquidity, faster settlement and completion of transaction.

• Enhances the acceptability in securities market.

• Reduction in transaction cost through greater efficiency.

• Faster receipt of corporate benefits/rights attached to the security.

• Thus, investor will increasingly find it easy to deal in the shares.

The process of opening an account with a depository participant is similar to the opening of a bank account. A list of depository participants can be obtained from NSDL / CDSL. Investor will have to approach any depository participant of his choice and fill up an account opening form and take up the dematerialization process with them.

On declaration of any corporate benefit viz. rights or bonus or dividend for a particular security, the depository will give all the details of the clients having electronic holdings of that security as of record date/book closure to the registrar. 

The registrar will then calculate the corporate benefits due to all the shareholders. The disbursement of cash benefits such as dividend/interest will be done by the registrar whereas the distribution of securities entitlements will be done by the depository based on the information provided by the registrar. 

In case of discrepancies in corporate benefits, investor can approach respective depository participant who in turn will contact the registrar for clarifications regarding allotment of securities or otherwise.

The Scheme of Arrangement between Kirloskar Brothers Limited (KBL), Kirloskar Brothers Investments Limited (KBIL) and their respective shareholders had been duly approved by the Hon’ble High Court of Judicature at Bombay on January 22, 2010. The Appointed Date for the scheme was April 16, 2009 and the Effective Date as per the scheme was March 2, 2010. 

In accordance with the Scheme, the shareholders of KBL holding say 20 (Twenty) equity shares of Rs. 2/- each as on the Record Date, were entitled to receive 15 (Fifteen) new equity shares of Rs. 2/- each of KBL after reduction of capital and 1 (One) equity share of Rs. 10/- of KBIL. 

Shareholders holding share certificate/s for their KBL shares, desiring to continue to hold KBL new equity shares and KBIL equity shares in the physical form, were issued new share certificates in lieu of the original KBL share certificate/s. 

The KBL and KBIL new share certificates for such equity shares, in the above mentioned ratio, under the Scheme were directly dispatched to the concerned shareholder/s by M/s. Link Intime India Private Limited (erstwhile Registrar and Transfer Agent). In case on non-receipt of such certificates, shareholders will have to comply with procedure for issue of duplicate share certificates. 

Shareholders are advised that they should deface the old share certificates in order to safeguard their interests against any misuse; as such certificates would be null and void and cannot be dealt with / dematerialized