Introduction
Before the 1990s, company shares were held physically, and certificates were issued to the respective shareholders. However, it also brought the risk of theft, loss, or misplacement, and wear & tear. As a result, a new system for storing shares, called "Dematerialisation", came into force in 1996. It also enabled an option of "Rematerialisation" for investors.
But what's the difference?
Keep scrolling to discover the difference between Dematerialisation and Rematerialisation, and when to choose what.
And if you are wondering if this can happen in case of lost physical certificates, continue reading.
What Is Dematerialisation?
Dematerialisation is a process of converting your physical share certificates into electronic form (Demat shares) via opening a demat account.
In simple words, your paper shares become digital assets.
To understand it better, think of it as earlier money existed mostly as cash notes. Today, the same money sits digitally in a bank account. Dematerialisation did the same thing for shares.
When you open a demat account, you basically create a digital storage space where securities like shares, bonds, ETFs, and mutual funds are held electronically.
How Dematerialisation Works?
Basically,
- You submit physical share certificates.
- A request is raised through your Depository Participant (broker or financial institution) via the Dematerialisation Request Form (DRF).
- The company verifies ownership.
- Physical certificates are destroyed.
- Equivalent shares appear digitally in your demat account.
Why Dematerialisation Became Important?
One prime reason for Dematerialisation to exist is due to the limitations of paper shares. It was difficult for people as;
- Certificates could be lost or stolen.
- Signature mismatches delayed transfers
- Fake certificates existed
- Selling shares took weeks
As a result of Dematerialization, the transactions became faster, trading became accessible to everyone (via online platforms), and ownership tracking was feasible.
What Is Rematerialisation?
But what if you want to convert their demat shares into physical share certificates?
For that purpose, a reverse process exists— Rematerialisation.
Rematerialisation means converting electronic securities back into physical share certificates.
Yes, even today, you can convert digital shares into paper form if you want. It may sound strange because most investors prefer digital holdings, but rematerialisation still exists as an option.
It was introduced at the same time as the Depositories Act, 1996, for Dematerialisation was enforced.
Difference Between Dematerialisation And Rematerialisation
Now, let us learn how Dematerialisation differs from Rematerialisation.
Basis | Dematerialisation | Rematerialisation |
Meaning | Converts physical shares into electronic form | Converts electronic shares into physical certificates |
Direction | Physical → Digital | Digital → Physical |
Storage | Stored in a demat account | Stored as paper certificates |
Convenience | Highly convenient as it is stored digitally. | Less convenient |
Trading Speed | Instant transactable | Cannot trade instantly in the digital world. |
Risk Level | Low risk of loss or damage (as compared to physical shares) | Risk of theft or damage |
Usage Today | Very common | Rarely used |
Requirement | Need to open demat account | Requires existing demat holdings (or physical share certificates) |
Processing | Faster and automated | Slower and manual |
Can I Dematerialise Lost Share Certificates & How?
If you have lost your physical share certificates and wish to get them converted, "Yes," you can.
You need to obtain the duplicate certificates by contacting the company's Registrar and Transfer Agents (RTA). Once obtained, you can dematerialise them.
Here's how you can obtain your lost shares.
- Inform the Company or Registrar and Transfer Agent (RTA)
Many companies require a written intimation (letter) along with identity proof to start the process.
- Check whether they were Dematerialised or Physical
Investors assume the shares were held physical, but they may have dematerialised them. Check once before proceeding further.
- Submit the asked documents
- RTA may ask to submit documents such as
- Copy or FIR (having details of the securities, folio number, distinctive number range, and certificate numbers)
- Identity proof
- Address proof
- An affidavit stating the loss of a share certificate
- An indemnity bond
- A newspaper advertisement in a widely circulated newspaper.
Which Method Should You Prefer: Dematerialisation or Rematerialisation
For most investors today, the answer is "Dematerialisation."
Modern markets are designed around digital ownership. Stock exchanges, brokers, and regulators operate assuming investors hold securities electronically.
Even in the scenario of "Lost Shares," companies encourage investors to "Dematerialise" shares to avoid the chances of theft, loss, or misplacement.
When you open a demat account, along with a trading account, you unlock access to IPOs, online trading, instant settlements, and diversified investments — things that physical certificates simply cannot support efficiently.
Rematerialisation, on the other hand, slows things down. If shares are converted into physical form, selling them again requires converting back through Dematerialisation.
So, practically, investors who actively participate in markets prefer keeping shares in demat form.
Can You Convert Demat Shares Into Physical Certificates?
Yes, you absolutely can.
Many beginners assume digital shares cannot be turned into physical ones, but that is not true. The option for Rematerialisation still exists under the Depository Regulations of 1996.
Here's how you can convert Demat Shares into Physical Form
- Contact your Depository Participant.
- Fill the Remat Request Form.
- Specify the securities you want converted.
- Submit a request for processing to NSDL's software (Depository Module)
- The DM forwards the request to the Issuer/ R&T agent electronically.
- Receive physical certificates after approval.
However, keep in mind:
- The process may take longer than digital transfers.
- Physical shares or securities sent for rematerialisation cannot be traded.
- You may need to dematerialise again if you want to sell later.
- The client must mention the lot type in the rematerialisation form.
Conclusion
The shift from paper-based investing to digital ownership completely changed financial markets. Processes like Dematerialisation made investing faster, safer, and accessible to millions of investors who earlier found markets complicated.
Understanding the minor difference between these two processes helps investors make informed decisions about how they want to hold their assets. And honestly, once you open demat account and experience digital investing, going back to paper rarely feels practical – but you can if you wish to.
