Disadvantages of Demat

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  • Trading in securities may become uncontrolled in case of dematerialized securities.
  • It is incumbent upon the capital market regulator to keep a close watch on the trading in dematerialized securities and see to it that trading does not act as a detriment to investors.
  • For dematerialized securities, the role of key market players such as stock-brokers needs to be supervised as they have the capability of manipulating the market.
  • Multiple regulatory frameworks have to be conformed to, including the Depositories Act, Regulations and the various Bye-Laws of various depositories.
  • Agreements are entered at various levels in the process of dematerialization. These may cause worries to the investor desirous of simplicity.
  • There is no provision to close a demat account, which is having illiquid shares. The investor cannot close the account and he and his successors have to go on paying the charges to the participant, like annual folio charges etc..
  • After liquidating the holdings, many Indian investors don't close their dp account.They are unaware that DPs charge even on dormant accounts
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Transfer of Shares between (depository participant) DPs[edit]

To transfer shares, an investor has to fill one of two kinds of Depository Instruction Slip (DIS). The first check made is whether both Demat accounts are at the same depository. There are two depositories: (CDSL (Central Depository Service (India) Limited) and NSDL (National Securities Depository Limited)). If both demat accounts are not at the same depository, then an Inter Depository Slip (Inter DIS) has to be filled and submitted. For example:
  • If there is one Demat account with CDSL and the other Demat account with NSDL, then an Inter-DIS is needed. (In case the investor needs an Inter-DIS, the investor should check with the broker, since brokers usually issue an Inter-DIS).
  • Now that the correct DIS has been determined, information pertaining to the transfer transaction has to be entered: scrip name, INE number, quantity in words and figures.
  • Finally, the investor should submit that DIS to the broker with signatures.
  • The transfer broker shall accept that DIS in duplicate and acknowledge receipt of DIS on duplicate copy.
The investor should submit the DIS when the market is open. Accordingly, date of submission of DIS and date of execution of DIS can be same or a difference of one day is also acceptable. The investor also has to pay the broker some charges for the transfer.

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