Answer» - Under the Depository system, physical certificates can be converted into electronic ones known as ‘Dematerialization’.
- Similarly, the conversion of electronic securities into physical certificates is known as ‘Rematerialization’.
- Due to Dematerialization transfer of securities takes place fast and transactions are also settled immediately. Whereas in Rematerialization, settlement of transactions in the physical system takes more time.
- In Rematerialization, storing and handling physical certificates is more time-consuming. Whereas in dematerialization, there is no handling of certificates.
- There are chances of certificates getting lost, damaged, torn, stolen, misplaced during transit, etc.
- In this technological world, Demat securities are more preferred over Rematerialized securities.
- Thus, it is rightly justified that the Depository system allows both: Physical to electronic and electronic to physical conversion.
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