Question

Read the following statements : Assertion (A) and Reason (R).

Assertion (A) : Holding shares in demat form is very convenient as it is just like a bank account.

Reason (R) : Securities and Exchange Board of India (SEBI) has made it mandatory for the settlement procedures to take place in demat form.

Choose the correct alternative from the following :

• A. Assertion (A) is false and Reason (R) is true.
• B. Both Assertion (A) and Reason (R) are false.
• C. Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
• D. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

Hint:

Both statements are true. Demat is convenient because it is electronic, not because SEBI made it mandatory, so R does not explain A.

Answer 1

The Correct Option is C

Step 1: Understand the demat system:
Demat means holding shares in electronic form instead of paper certificates. The shares sit in an account with a depository, much like money sits in a bank account.

Step 2: Check the Assertion (A):
Shares can be bought, sold and transferred without handling paper. There is no risk of loss, theft or forgery of certificates.
This is why holding shares in demat form is called convenient, like a bank account. So (A) is TRUE.

Step 3: Check the Reason (R):
SEBI has made it compulsory that trading and settlement of shares take place in demat form. So (R) is also TRUE.

Step 4: Does R explain A?:
Convenience comes from electronic holding, the ease of transfer and no paperwork. A rule by SEBI makes demat compulsory, but it does not make demat convenient.
So R is true but is not the explanation of A.

Step 5: Check the options:
Option (1) says A is false, but A is true. Wrong.
Option (2) says both are false. Wrong.
Option (4) says R explains A, which is not so. Wrong.
Option (3) says both are true but R is not the explanation. Correct.

Final Answer:
Both statements are true, but the Reason does not explain the Assertion, which is option (3).