Question

Which of the following processes converts physical shares into Electronic form?

• A. Rematerialisation
• B. Dematerialization
• C. Demutualization
• D. Depositary

Hint:

Remember: "Demat" = Dematerialization (Physical to Electronic). "Remat" = Rematerialisation (Electronic to Physical). Think of "De-" as removing the material form.

Answer 1

The Correct Option is B

Step 1: Understand the concept of share certificates.
Shares can be held in two forms:

Physical form: Paper certificates issued by the company.
Electronic/Demat form: Shares held in electronic accounts with depository participants.

Step 2: Define the key terms.

Dematerialization: The process of converting physical share certificates into electronic form (Demat form). It is commonly referred to as "Demat".

Rematerialisation: The reverse process of converting electronic shares back into physical certificates.

Demutualization: The process of converting a mutual organization (such as a stock exchange owned by members) into a company owned by shareholders.

Depositary: An institution that holds securities in electronic form (for example, NSDL and CDSL in India).

Step 3: Analysis of each option.

(A) Rematerialisation: Incorrect. This is the opposite process—converting electronic shares into physical form.

(B) Dematerialization: Correct. This is the process of converting physical share certificates into electronic form.

(C) Demutualization: Incorrect. This relates to the organizational structure of stock exchanges, not share conversion.

(D) Depositary: Incorrect. A depositary is the institution that holds electronic shares, not the process of conversion.

Step 4: Conclusion.
Dematerialization eliminates physical share certificates and creates corresponding electronic entries in a depository system.

Final Answer: (B) Dematerialization