NISM-Series-VI: Depository Operations · Functions of Depository Participant - Account Operations

Dematerialisation, Rematerialisation and Corporate Actions in Depository Operations

Updated 11 October 2026 · Fact-checked

Dematerialisation converts physical share certificates into electronic holdings. You submit a Demat Request Form and the certificates to your DP, which routes the request through the depository to the issuer or RTA. Rematerialisation reverses this. Corporate actions like dividend, bonus, split and rights are processed using the holding on the record date.

Understand Dematerialisation, Rematerialisation and Corporate Actions

A demat account holds securities in electronic form. If you still own paper share certificates, you must convert them before you can trade them on an exchange. This conversion is dematerialisation. The investor never deals with the depository directly. Everything goes through the Depository Participant (DP).

The flow is simple. You open a demat account and fill a Demat Request Form (DRF). You hand it to the DP with the physical certificates. The DP checks the documents, defaces each certificate by stamping it "Surrendered for Dematerialisation", and generates a Demat Request Number (DRN). The DP sends the request electronically to the depository, and sends the certificates physically to the issuer or its Registrar and Transfer Agent (RTA). The issuer or RTA verifies the certificates and the signatures. It then confirms or rejects the request through the depository. On confirmation, the depository credits the securities to your account. On rejection, the certificates go back to you with the reason.

Rematerialisation is the reverse. You submit a Remat Request Form (RRF) to your DP. The DP checks that the securities are free and not pledged or frozen, and the depository blocks the quantity in your account. The issuer or RTA prints the certificates and sends them to you. The depository then debits the electronic balance. Until the process ends, you cannot use the blocked securities.

Corporate actions are events by the issuer that affect shareholders: dividend, bonus, split, rights and so on. The issuer fixes a record date. Whoever holds the security in the depository records at the end of that date is entitled to the benefit. The depository gives the issuer the list of beneficial owners. Bonus and split shares are credited straight into your demat account. Dividend is paid electronically to the bank account linked to your demat account. In a rights issue, you receive rights entitlements in your demat account. You can exercise them or renounce them.

So the idea is simple. The DP is your single window, and the depository keeps the records. The issuer decides what is owed, and the record-date holding decides who gets it.

Key formulas to remember

Demat flow: Investor → DP (DRF + certificates) → Depository + Issuer/RTA → confirmation → credit to account; Certificates go physically to the issuer/RTA. The request goes electronically through the depository. The DP defaces certificates before forwarding them.
Remat flow: Investor → DP (RRF) → Depository blocks balance → Issuer/RTA prints certificates → depository debits balance; Securities must be free of pledge or freeze. The balance is blocked while the request is pending.
Bonus shares: Bonus shares = Holding × (bonus shares ÷ shares held in the ratio); A 1:2 bonus means 1 new share for every 2 held. Total after bonus = holding + bonus shares.
Stock split: Shares after split = Holding × (old face value ÷ new face value); Face value falls and the number of shares rises. The total face value of your holding does not change.
Cash dividend: Dividend = Shares held on record date × dividend per share; Entitlement depends on the record-date holding, not on the date you bought. Paid to the bank account linked to the demat account.

How to solve Dematerialisation, Rematerialisation and Corporate Actions questions

Use the same method for any question on demat, remat or corporate actions.

1Identify the topic: demat, remat, or a corporate action. Check whether the question asks about a step, a document, a party or a calculation.
2For demat or remat, place the step in the flow: investor, DP, depository, issuer/RTA, back to depository, then account. Ask who does this step.
3Check the conditions. For demat: DRF filled, certificates defaced, names and order of holders match the account. For remat: securities free of pledge or freeze.
4For rejection questions, link the cause to the issuer/RTA check: signature mismatch, forged or fake certificate, name mismatch, or a court order or stop transfer on the shares.
5For a corporate action, find the record date and the ratio. Work out the entitlement from the holding on the record date.
6Calculate in order if there are several actions. Apply each action to the quantity left by the previous one.
7Cross-check the answer against the options. Remove options that put the wrong party in charge, such as the investor dealing directly with the depository.

Quickest way: Who does what, and what is the record date

When to use it: Use for definition, sequence and party-identification MCQs when you have under a minute.

Remember the line: DP defaces and forwards, depository records, issuer/RTA verifies and confirms.
For remat, remember: the DP checks, the depository blocks, the issuer prints, and the depository then debits.
For corporate actions, ask only one thing: who held the security on the record date?
For calculations, write the ratio as new shares per old shares and multiply once. Bonus adds shares. Split multiplies shares.
Eliminate options that say the investor sends the request directly to the depository or that give benefits to someone who bought after the record date.

Common mistakes in Dematerialisation, Rematerialisation and Corporate Actions

Thinking the investor sends the demat request to the depository or the issuer directly.
The depository seems to be the main player, so students assume direct contact.
Fix: The investor deals only with the DP. The DP routes the request to the depository and sends the certificates to the issuer/RTA.
Forgetting that the DP defaces the certificates by stamping "Surrendered for Dematerialisation".
Students focus on the DRF and skip the physical handling of certificates.
Fix: Link the DRF, the defacing stamp and the DRN. These three belong together at the DP stage.
Treating a demat request as accepted once the DP has forwarded it.
Students stop the flow at the DP or depository.
Fix: The issuer/RTA must verify and confirm. Only then does the depository credit the account. The request can be rejected at this stage.
Allowing remat of pledged or frozen securities.
Students forget that a remat request needs free securities.
Fix: Remember that the balance gets blocked for remat. Pledged or frozen securities cannot be used for it.
Giving bonus or dividend to someone who bought after the record date.
Students think the benefit follows the latest owner.
Fix: Entitlement is based on the holding on the record date, as recorded in the depository.
Reading a 1:2 bonus as 1 new share for every 3 held, or confusing a split with a bonus.
The ratio notation looks like a total holding ratio.
Fix: A 1:2 bonus is 1 extra share for every 2 held. A split changes face value and the number of shares but adds no value. A bonus issue adds shares from reserves.

Worked examples

Example 1

You hold 400 shares of face value ₹10 on the record date. The company splits each share into shares of face value ₹2. Later it announces a bonus of 1:4 (1 bonus share for every 4 held) on the post-split holding. How many shares do you hold after both actions?

Show the solution

Split ratio = old face value ÷ new face value = 10 ÷ 2 = 5.
Shares after split = 400 × 5 = 2,000.
Bonus 1:4 on 2,000 shares: 2,000 ÷ 4 = 500 bonus shares.
Total = 2,000 + 500 = 2,500 shares.

Answer: 2,500 shares

Example 2

Which statement about rematerialisation of securities held in a demat account is correct? (A) The investor sends the Remat Request Form directly to the issuer. (B) The securities are blocked in the account while the request is processed. (C) The depository prints the certificates. (D) Pledged securities can be rematerialised without any condition.

Show the solution

(A) is wrong. The investor submits the request to the DP, not to the issuer.
(C) is wrong. The issuer or its RTA prints the certificates, not the depository.
(D) is wrong. The securities must be free of pledge or freeze.
(B) is right. The depository blocks the quantity while the issuer prepares the certificates, and debits it once the process is confirmed.

Answer: (B)

Exam tips

Learn the demat flow as a sequence of parties. Many questions ask who does a step or what comes next.
Link the DRF, the defacing stamp, the DRN and the physical certificates sent to the issuer/RTA as one block.
For corporate actions, always find the record date first. A purchase after it does not count.
In ratio questions, read the wording carefully. Bonus adds shares and split multiplies shares. Do the actions in the order given.
If the question mentions a rejected request, think of verification failures at the issuer/RTA, such as mismatched signatures or names, fake certificates or a stop on the shares.

Practice questions from Functions of Depository Participant - Account Operations

Dematerialisation, Rematerialisation and Corporate Actions: frequently asked questions

What is the dematerialisation process step by step?

You open a demat account and fill the DRF. You give it to the DP with the certificates. The DP defaces the certificates, generates a DRN and sends the request electronically through the depository and the certificates physically to the issuer/RTA. After the issuer/RTA confirms, the depository credits your account.

Why can a demat request be rejected?

The issuer/RTA may find a signature mismatch, a name that differs from the certificate, a fake or forged certificate, or a stop on the shares. In that case it rejects the request through the depository and the certificates are returned. Check the exact reasons in your NISM workbook.

How do I get physical certificates back from my demat account?

Submit a Remat Request Form to your DP. The DP checks that the securities are free, and the depository blocks the quantity. The issuer/RTA then prints and sends the certificates, and the balance is debited in your demat account.

How are corporate actions processed in a demat account?

The issuer announces the action and a record date. The depository provides the holdings on that date, and the issuer credits bonus or split shares to the accounts. Dividend goes to the linked bank account. In a rights issue, rights entitlements are credited to the demat account.