How to Convert Physical Shares into Demat

Equity ownership in India has transitioned from physical share certificates to electronic holdings maintained through demat accounts under SEBI’s regulatory framework. Listed securities are now settled exclusively in dematerialised form, making physical certificates inactive for exchange-based transactions. For investors who continue to hold paper shares, conversion into electronic format is a necessary step to align with current market infrastructure and settlement systems.

The Dematerialisation process outlines how physical share certificates are converted into electronic form through the depository system. The sequence below outlines how to convert paper shares to demat in accordance with standard depository and settlement practices.

Step 1: Opening a Demat Account

A Demat account is required with a Depository Participant (DP) registered with either CDSL or NSDL to hold Dematerialised shares. Account opening involves submission of KYC documents and completion of verification procedures as prescribed by the DP.

Step 2: Submitting the Dematerialisation Request Form

The Dematerialisation Request Form (DRF) is issued by the DP and is completed separately for each company whose physical shares are being submitted. Details recorded in the form are required to match the information appearing on the share certificates and the company’s records.

Step 3: Submission of Physical Certificates

Original share certificates are submitted along with the DRF. The certificates are processed in their existing condition, subject to verification of names, folio numbers, and holder sequence.

Step 4: DP Verification and Forwarding

The DP verifies the request, generates a Dematerialisation Request Number (DRN), and forwards the documents to the company’s Registrar and Transfer Agent (RTA) for validation.

Step 5: Verification by the RTA

The RTA examines certificate authenticity, holder details, and records for any restrictions such as stop transfers or legal encumbrances before confirming the request to the depository.

Step 6: Credit of Shares

Upon confirmation, the depository credits the shares to the Demat account under the applicable ISIN. Updates are reflected in account statements and communicated through registered contact details.

The Dematerialisation of physical share certificates requires submission of specified documents to the Depository Participant (DP) and the company’s Registrar and Transfer Agent (RTA). These documents enable verification of ownership, identity, and certificate authenticity before shares are credited in electronic form.

The documents generally required for this process include:

• Physical share certificates

Original share certificates issued by the company are submitted for conversion. These certificates form the primary record of ownership and are verified by the RTA before Dematerialisation approval.

• Dematerialisation Request Form (DRF)

The DRF is issued by the Depository Participant and captures details such as certificate numbers, folio numbers, share quantity, and shareholder names. Separate DRFs are submitted for each company whose shares are being Dematerialised.

• Demat account details

An active Demat account with a registered Depository Participant is required to receive the electronic credit of shares. The account holder names and holding pattern must correspond with those recorded on the physical certificates.

• Permanent Account Number (PAN)

PAN details of the shareholder(s) are required for identity verification and regulatory compliance, as mandated under SEBI and income tax regulations.

• Signature verification records

Signatures provided on the DRF are matched against specimen signatures maintained by the company or its RTA. Any variation may require prior record updating before the request can be processed.

• Additional supporting documents (where applicable)

  Certain situations may require supplementary documentation, such as:

  • Proof of name change or correction

  • Legal documents for transmission in case of death

  • Indemnity bonds or affidavits for lost or damaged certificates

  Document requirements may vary depending on the nature of the holding and the company’s registrar procedures, but the above constitute the standard documentation framework for Dematerialising physical shares in India.

   

Holding shares in Dematerialised form reflects current regulatory and settlement frameworks applicable to listed securities. Key aspects include:

• Regulatory alignment

Listed securities are required to be held in Dematerialised form for exchange-based transactions.

• Electronic record-keeping

Shareholdings are maintained through the Demat account, eliminating dependence on physical certificates.

• Settlement and transferability

Dematerialised shares are eligible for electronic transfer and exchange settlement mechanisms.

• Corporate action processing

Benefits such as dividends, bonus issues, and rights entitlements are credited directly to the Demat account.

A dematerialisation request is initiated through a registered Depository Participant using the Dematerialisation Request Form (DRF). The request captures details of the physical share certificates and is recorded in the depository system under a unique Dematerialisation Request Number (DRN).

Physical certificates submitted with the DRF are forwarded to the company’s Registrar and Transfer Agent (RTA) for verification. Upon confirmation of ownership details and certificate validity, the securities are credited in electronic form to the Demat account under the relevant ISIN, and the physical certificates are extinguished.

The process to convert paper shares to Demat typically takes two to three weeks from submission, subject to verification. Processing timelines may vary based on:

• Signature or name mismatches

• Condition of physical certificates

• Pending corporate, legal, or compliance checks

The conversion of physical share certificates into Dematerialised form involves coordination between multiple entities, including depository participants, registrars and transfer agents, and depositories. During this process, certain challenges are commonly observed due to the age of records, documentation requirements, and verification standards.

Documentation mismatches

Differences between details mentioned on physical certificates and current records—such as name spelling, signature style, or address—may result in the Dematerialisation request being flagged or returned for clarification.

Signature verification issues

Signatures recorded decades earlier may not match current signatures available with registrars, leading to additional verification steps before Dematerialisation can proceed.

Damaged or defaced certificates

Physical certificates that are torn, faded, laminated, or partially illegible may not be accepted for direct Dematerialisation and may require replacement through separate issuer-level processes.

Pending legal or procedural restrictions

Shares subject to stop-transfer instructions, legal disputes, succession-related claims, or incomplete transmission processes may remain ineligible for immediate Dematerialisation until such matters are resolved.

Registrar response timelines

The Dematerialisation process is dependent on verification by the company’s registrar and transfer agent. Processing time may vary based on record availability, volume of requests, and the completeness of submitted documentation.

Multiple certificates and folios

Holdings spread across several certificates or folio numbers may require multiple Dematerialisation requests, increasing administrative handling and verification effort.

These challenges reflect procedural and record-based complexities inherent in converting legacy physical holdings into the current electronic settlement framework.

Certain scenarios may require additional documentation or prior updates before Dematerialisation:

Lost or Damaged Certificates

Duplicate certificates are issued by the RTA after submission of prescribed affidavits, indemnities, and supporting documents.

Name Change or Mismatch

Name corrections or updates are required to be recorded with the RTA before DRF submission.

Joint Holder Differences

The order and spelling of holder names must correspond exactly with the details on the share certificates.

Apart from standard DP service charges, the following may apply depending on the DP’s fee structure:

• Dematerialisation charges (per certificate or per ISIN)

• Courier or document handling charges

• Applicable GST on service fees

Converting physical shares into Dematerialised form changes how securities are held and processed within the depository system. Key outcomes include:

• Electronic holding of securities
  Share certificates are maintained in digital form, eliminating reliance on physical documents.
  

• Eligibility for market transactions
  Dematerialised shares can be sold or transferred through exchange and depository settlement systems.
  

• Automatic credit of corporate actions
  Dividends, bonus shares, and rights entitlements are credited directly to the Demat account.
  

• Consolidated share records
  Multiple physical certificates are reflected as a single holding under the relevant ISIN.
  
  

Once shares are Dematerialised and sold through a broker, the sale proceeds are credited to the linked trading account. From there, investors can transfer money from Demat account to bank account seamlessly, ensuring faster access to funds and smoother portfolio management.

The Dematerialisation of physical shares represents a structured conversion of paper-based holdings into electronic form under the depository framework. The process is governed by verification, record matching, and regulatory confirmation. Once completed, securities are maintained digitally and integrated within standard trading and settlement systems.

This content is for informational purposes only and the same should not be construed as investment advice. Bajaj Finserv Direct Limited shall not be liable or responsible for any investment decision that you may take based on this content.