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NISM Certifications · NISM-Series-VI: Depository Operations · Introduction to the Indian Capital Market

Before the introduction of depositories, an investor, Mr. Sanjay Iyer, faced risks when holding share certificates. Which problem is directly addressed by dematerialisation?

Dematerialisation addresses the risks of physical certificates, namely forgery, loss, theft and bad delivery, along with transfer delays. It does not affect share price fluctuations, dividend declarations or tax rates, because these are unrelated to whether securities are held electronically or physically.

  1. ABad delivery, forgery and loss or theft of physical certificatesCorrect
  2. BFluctuation in the market price of shares
  3. CDeclaration of lower dividends by companies
  4. DChanges in the rate of income tax on dividends

Explanation

Dematerialisation replaces physical certificates with electronic records, removing risks such as forged or lost certificates, bad delivery and delays in transfer. It does not influence market price movements, dividend decisions or tax rates, which are unrelated to the form of holding.

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