NISM-Series-VI: Depository Operations · Investor Services (NISM VI)

Dematerialisation (Demat) Process: Step-by-Step Guide

Updated 11 October 2026 · Fact-checked

Dematerialisation converts physical share certificates into electronic holdings. You submit a Demat Request Form (DRF) and the certificates to your DP. The DP verifies and sends the request to the issuer or its registrar (RTA). The RTA accepts and confirms to the depository, which credits your account. The certificates are then cancelled.

Understand Dematerialisation (Demat) Process

Dematerialisation means converting securities held as paper certificates into electronic balances in a depository account. The shares stay the same. Only the form of holding changes. The investor must already have a demat account with a Depository Participant (DP).

The process starts with the Demat Request Form (DRF). You fill it in, one DRF for each ISIN, and give it to your DP along with the physical certificates. The DRF is a form that the DP issues to you. Before forwarding anything, the DP checks that the names and their order on the certificates match the demat account. A mismatch is normally caught at this stage. After verifying the certificates, the DP defaces them by marking them "Surrendered for Dematerialisation". You do not mark them yourself.

The DP does not change the register itself. It generates a Demat Request Number (DRN), enters the request in the depository system, and sends the DRF and the defaced certificates to the issuer or its Registrar and Transfer Agent (RTA). The RTA checks the certificates against the company's records. This includes signatures, folio details and any stop or lock on the shares.

If everything is in order, the RTA accepts the request and confirms it to the depository. The depository then credits the shares to your demat account. The RTA cancels the certificates and changes the register to show the depository as the registered owner while you remain the beneficial owner. If the RTA finds a defect, including a name mismatch that the DP missed, it rejects the request and returns the documents to the DP with the reason. The DP returns them to you. You fix the defect and submit a fresh request.

For the exam, remember the chain: investor, DP, issuer or RTA, depository, back to the investor's account. Know who checks what, and what happens on rejection.

Key formulas to remember

Demat flow: Investor → DRF + certificates → DP → DP generates DRN and enters the request in the Depository system, and sends DRF + defaced certificates to Issuer/RTA → RTA accepts and confirms to Depository → Depository credits demat account; Learn the order. Questions often ask who acts next. The RTA's confirmation comes before the credit.
One DRF per ISIN: 1 DRF = 1 ISIN (one security); Certificates of different securities need separate DRFs.
Certificate marking: DP verifies certificates → DP marks them "Surrendered for Dematerialisation" → DP generates DRN and enters the request in the depository system → DP sends the certificates with the DRF to the issuer/RTA; The investor does not mark the certificates. The DP defaces them after verifying them and checking that the holders' names match the account.
Ownership after demat: Depository = registered owner; investor = beneficial owner; Voting and benefits go to the beneficial owner.
Name match rule: Names and order on certificates = names and order in demat account; The DP checks this before forwarding. A mismatch is caught at the DP, or rejected by the RTA if it is missed. Fix it by opening or using an account with the same names in the same order.

How to solve Dematerialisation (Demat) Process questions

Use this method for any question on how demat works, who does what, or what happens next.

1Identify the stage the question is about: submission, DP check, issuer or RTA processing, or rejection.
2Recall who acts at that stage: investor, DP, RTA or depository.
3Check the document in question: DRF, certificates, or account details.
4Check the match: names, holding order and ISIN against the demat account.
5Decide the outcome: accepted and credited, or rejected and returned through the DP.
6Compare options. Eliminate any that reverse the flow or give the DP the RTA's role.
7Pick the option that keeps the beneficial owner as the investor and the depository as registered owner.

Quickest way: Flow-and-role check

When to use it: Use when you have under a minute per question and the options list steps or roles.

Write the chain in your mind: Investor, DP, RTA confirms, Depository credits.
Ask which actor the question names. Match it to its one job.
Spot the trap: an option that makes the DP cancel certificates or credit the account without the RTA's confirmation.
If the question is about rejection, pick the option where the documents return via the DP and a fresh request is made.

Common mistakes in Dematerialisation (Demat) Process

Saying the DP cancels the certificates and updates the company's register.
The DP handles the paperwork, so it seems to do everything.
Fix: The issuer or RTA verifies, cancels the certificates and updates the register. The DP verifies the documents, enters the request (DRN) in the depository system and sends the DRF and defaced certificates to the RTA.
Thinking one DRF can cover several different securities.
Students assume one form per submission.
Fix: Use one DRF per ISIN. Different securities need separate DRFs.
Believing the investor loses ownership after demat.
Confusing registered owner with beneficial owner.
Fix: The depository becomes registered owner in the books. The investor stays beneficial owner with all rights.
Thinking a rejected request is lost or the shares are cancelled.
The word rejection sounds final.
Fix: Rejection only means the request failed. Documents return through the DP. You fix the defect and apply again.
Ignoring the name and holding order match.
It looks like a small detail.
Fix: Names and their order on the certificates must match the demat account. A mismatch is a common reason for rejection.

Worked examples

Example 1

An investor holds physical certificates of two different companies. How many DRFs must she submit, and to whom?

Show the solution

Each DRF covers one ISIN, which means one security.
Two companies have two different ISINs.
So she needs two DRFs.
She submits them with the respective certificates to her DP, not directly to the company.

Answer: Two DRFs, submitted to her DP along with the respective certificates.

Example 2

The RTA rejects a demat request because the holder's name on the certificate does not match the demat account. What happens next?

Show the solution

The DP should have checked the names and their order before forwarding. Here the mismatch was missed and the request reached the RTA.
The RTA rejects the request and records the reason.
The RTA returns the documents to the DP.
The DP returns the certificates and DRF to the investor.
The investor corrects the defect by opening or using an account with the same names in the same order, and submits a fresh request.
The certificates are not cancelled and no credit is made to the account.

Answer: The documents come back through the DP, no shares are credited, and the investor must correct the mismatch and apply again.

Exam tips

Questions test roles. Know that the DP verifies and forwards, and the RTA verifies, cancels and confirms.
Watch for 'one DRF per ISIN' and the 'Surrendered for Dematerialisation' marking as direct-recall options.
Rejection questions usually ask for the next step. The answer is return through the DP and a fresh request.
Do not confuse registered owner with beneficial owner. Expect at least one statement-style question on it.
NISM-Series-VI has negative marking of 25% of the marks assigned to a question. Guess only after you have eliminated options with the flow check. Do not guess blindly.

Practice questions from Investor Services (NISM VI)

Dematerialisation (Demat) Process: frequently asked questions

What is the demat process step by step?

You open a demat account, fill a DRF for each security, and submit it with the certificates to your DP. The DP verifies them, defaces the certificates by marking them "Surrendered for Dematerialisation", and forwards them with the DRF to the issuer or RTA. After the RTA confirms, the shares are credited to your account.

What happens if a demat request is rejected?

The RTA returns the documents to the DP with the reason for rejection. The DP hands them back to you. You correct the defect and submit a fresh request. No shares are credited in the meantime.

Who actually cancels the physical certificates?

The issuer or its RTA cancels them after accepting the request. The DP does not cancel them.

Do I lose ownership when shares are dematerialised?

No. The depository appears as registered owner in the issuer's records, but you remain the beneficial owner and receive the benefits and voting rights.