PROJECT SYNOPSIS: DEMATERIALIZATION SCOPE AND EFFECT

INTRODUCTION
Dematerialization (DEMAT) is the move from physical certificates to electronic book keeping.
Actual stock certificates are slowly being removed and retired from circulation in exchange for
electronic recording.
In finance and financial

law, dematerialization refers

to

the

substitution

of

paper-

form securities by book-entry securities. This is a form of indirect holding system where an
intermediary, such as a broker or central securities depository holds a record of the ownership of
shares usually in electronic format. The dematerialization of securities such as stocks has been a
major trend since the late 1960s, with the result that by 2010 the majority of global securities
were held in dematerialized form.
Although the phenomenon is ancient, since book entry systems for recording securities have
been noted from civilisations as early as Assyria in 2000 BC, it gained new prominence with the
advent of computer technology in the late 20th century. Even during the period when paper
certificates were popular, book-entry systems continued since many small firms could not afford
printing secured paper-form securities. These book-entry securities were often held under the
control of an attorney who acts as a notary to certify the existence of the securities, as well as
their authenticity.
However, the phenomena of dematerialization of securities issued by large firms is mostly
undertaken via Central Securities Depository, a national or regional institution holding the notary
function.
Dematerialization in short called as 'demat is the process by which an investor can get physical
certificates converted into electronic form maintained in an account with the Depository
Participant. The investors can dematerialize only those share certificates that are already
registered in their name and belong to the list of securities admitted for dematerialization at the
depositories.
Depository : The organization responsible to maintain investor's securities in the electronic form
is called the depository. In other words, a depository can therefore be conceived of as a "Bank"
for securities. In India there are two such organizations viz. NSDL and CDSL. The depository

concept is similar to the Banking system with the exception that banks handle funds whereas a
depository handles securities of the investors. An investor wishing to utilize the services offered
by a depository has to open an account with the depository through a Depository Participant.
Depository Participant : The market intermediary through whom the depository services can be
availed by the investors is called a Depository Participant (DP). As per SEBI regulations, DP
could be organizations involved in the business of providing financial services like banks,
brokers, custodians and financial institutions. This system of using the existing distribution
channel (mainly constituting DPs) helps the depository to reach a wide cross section of investors
spread across a large geographical area at a minimum cost. The admission of the DPs involve a
detailed evaluation by the depository of their capability to meet with the strict service standards
and a further evaluation and approval from SEBI. Realizing the potential, all the custodians in
India and a number of banks, financial institutions and major brokers have already joined as DPs
to provide services in a number of cities.
STATEMENT OF THE PROBLEM
Prior to dematerialization there was almost a gap of three months between application date and
listing of shares .Dematerialisation has reduced this gap to a great extent. But quick money
brings with itself a host of problems. Current regulations prohibit multiple bids or applications
by a single person. But the investors open multiple demat accounts and make multiple
applications to subscribe to IPO's in the hope of getting allotment.
BACKGROUND OF THE STUDY
To convert the shares into electronic form the investor should open an account with any of the
depository participants. For opening an account the investor has to ill up the account opening
form. An account number (client ID) will be allotted after signing the agreement which defines
the rights and duties of the DP and the investor wishing to open the account. The client ID along
with the DP ID gives a unique identification in the depository system. Any number of depository
accounts can be opened.
After opening an account with the DP the investor should surrender the physical certificates held
in his name to a depository participant. These certificates will be sent to the respective
companies where they will be cancelled after dematerialization and will credit the investors
account with the DP. The securities on dematerialisation will appear as balances in the depository

account. These balances can be transferred like the shares held in physical form. Dematerialised
shares are in the fungible form and do not have any distinctive or certificate numbers .The
securities in the demat can again be converted into physical form which is called as
dematerialization.
SCOPE OF THE STUDY
Scope of the study is to understand the dematerialization and its scope and effects.
OBJECTIVES OF THE STUDY

To understand the dematerialization and its scope and effects.

To take the respondents view regarding dematerialization and its scope and effects.
To understand the benefits of dematerialization.
To understand the procedure of dematerialization.

METHODOLOGY
Methodology stands for the ways & means that we adopt for conducting research. In this we
study the various steps that are generally adopted by a researcher in pursuing the research
Research methodology consist of enunciating the problem, formulating the hypothesis, collecting
the facts of data, analyzing the fact and reaching certain conclusion either in the form of
solutions towards the concerned problem or in the form of certain generalizations for some
theoretical formulation.
All progress is born of enquiry. Dealt is often better than overconfidence for it leads to inquiry,
& inquiry leads to invention.
All progress is born of enquiry. Dealt is often better than overconfidence for it leads to inquiry,
& inquiry leads to invention.
Research methodology is a way to systematically solve the problem. It may be understood has a
science of studying how research is done scientifically. In it we study the various steps that all
generally adopted by a researcher in studying his research problem along with the logic behind
them.
The scope of research methodology is wider than that of research method.

Research is defined as a scientific & systematic search for pertinent information on a specific
topic. Research is an art of scientific investigation. Research is a systemized effort to gain new
knowledge. It is a careful inquiry especially through search for new facts in any branch of
knowledge. The search for knowledge through objective and systematic method of finding
solution to a problem is a research.
RESEARCH DESIGN
A research is the arrangement of the conditions for the collections and analysis of the data in a
manner that aims to combine relevance to the research purpose with economy in procedure. In
fact, the research is design is the conceptual structure within which research is conducted; it
constitutes the blue print of the collection, measurement and analysis of the data. As search the
design includes an outline of what the researcher will do from writing the hypothesis and its
operational implication to the final analysis of data.
The design is such studies must be rigid and not flexible and most focus attention on the
following;
Research Design can be categorized as:
The present study is exploratory in nature, as it seeks to discover ideas and insight to brig out
new relationship. Research design is flexible enough to provide opportunity for considering
different aspects of problem under study. It helps in bringing into focus some inherent weakness
in enterprise regarding which in depth study can be conducted by management.
The research design used in this project by the researcher is the descriptive research design.
Descriptive research design
It is well structured.
It is more economical, we can gather more information.
Problems can be found after the questionnaire preparation.
It needs less time.
Data Collection
For any study there must be data for analysis purpose. Without data there is no means of study.
Data collection plays an important role in any study. It can be collected from various sources. I
have collected the data from two sources which are given below:
Primary data : A survey will be conducted to gather primary data from the market here the main
emphasis will be given on the supply chain practices followed by different companies. It will

help us to know the general practices being followed in the market. The executives of the
company will be interview for knowing the better insight of the company.
Data observed or collected directly from first-hand experience. Data, or facts, may be derived
from several sources. Data can be classified as primary data and secondary data. Primary data is
data gathered for the first time by the researcher; secondary data is data taken by the researcher
from secondary sources, internal or external. The researcher must thoroughly search secondary
data sources before commissioning any efforts for collecting primary data. There are many
advantages in searching for and analyzing data before attempting the collection of primary data.
In some cases, the secondary data itself may be sufficient to solve the problem. Usually the cost
of gathering secondary data is much lower than the cost of organizing primary data. Moreover,
secondary data has several supplementary uses. It also helps to plan the collection of primary
data, in case, it becomes necessary. We shall therefore discuss secondary data first and then take
up primary data.
Talking with the employees of the department.
Discussion with the head of the department.
Secondary data collection methods
Published data and the data collected in the past or other parties is called secondary data

Companies and other websites

Reports /Articles/Blogs

magazines/journals News papers/business magazine

Published Sources such as Journals, Government Reports, Newspapers and Magazines

etc.

Unpublished Sources such as Company Internal reports prepare by them given to their
analyst & trainees for investigation.

Websites and some official site, some other sites are also searched to find data
Research Plan: Research Plan is no specific for all types of research; it is decided depending
upon the nature of the problem
Designing a research plan calls for decisions on

Data sources

Research Instruments

Sampling plan

Contact methods.

Limitations:
Time pressure and fatigue on the part of respondents and interviewer.
Respondents inability to formulate a response.
Tool used:
The researcher carries out analysis through various statistical tools. The statistical analysis is
useful for drawing inference from the collected information. While making the project file
various tools will be used.
These are: Frequency Table
Microsoft Excel
Microsoft Word
Various analysis tools like Bar Graphs, Pie Graphs, tables
Sampling procedure / Sampling method
The sampling method used for this study is non-profitability convenience sampling, which is
selected according to the easy and convenience of the researcher.
Sample Size: 100 respondents
Geographical Area: The study is conducted in India.
Research Instrument
Research instrument used for data collecting is by using questionnaire.
Questionnaire
The questionnaire is prepared in a well-structured and non disguised form so that it is easily
understandable and answerable by everyone. The type of questions include in the questionnaire
are open-ended questions, multiple choice questions and dichotomous questions

LIMITATIONS OF THE STUDY

Time pressure and fatigue on the part of respondents and interviewer.

Respondents inability to formulate a response.

3
4
5

Total research work is based on Primary and secondary data.

During the research a significant error up to 4% will be accepted.
Financial limitation causes incomplete data collection.

External activities are not considered as various factors of change.

FURTHER DIRECTION OF FUTURE RESEARCH
Trading in demat segment completely eliminates the risk of bad deliveries. In case of transfer of
electronic shares, you save 0.5% in stamp duty. Avoids the cost of courier/ notarization/ the need
for further follow-up with your broker for shares returned for company objection No loss of
certificates in transit and saves substantial expenses involved in obtaining duplicate certificates,
when the original share certificates become mutilated or misplaced. Increasing liquidity of
securities due to immediate transfer & registration Reduction in brokerage for trading in
dematerialized shares Receive bonuses and rights into the depository account as a direct credit,
thus eliminating risk of loss in transit. Lower interest charge for loans taken against demat shares
as compared to the interest for loan against physical shares. RBI has increased the limit of loans
availed against dematerialized securities as collateral to Rs 20 lakh per borrower as against Rs 10
lakh per borrower in case of loans against physical securities. RBI has also reduced the minimum
margin to 25% for loans against dematerialized securities, as against 50% for loans against
physical securities. Fill up the account opening form, which is available with the DP. Sign the
DP-client agreement, which defines the rights and duties of the DP and the person wishing to
open the account.
BIBLIOGRAPHY

http://www.investopedia.com/terms/d/dematerialization.asp

https://en.wikipedia.org/wiki/Dematerialization_(securities)

http://content.icicidirect.com/newsiteContent/Institute/equities/basics_on_stock_market_
5.html?height=450&width=650

http://server1.docfoc.com/uploads/Z2015/12/30/2WCKni2iUJ/document.pdf

http://www.flame.org.in/KnowledgeCenter/Whatisdematerialisationofsecurities.aspx