Holding mutual funds in demat form
Like equity shares, mutual funds also offer their investors an option to hold the mutual funds in demat (dematerialized) form. But is it beneficial to investors in any manner? Let’s find out.
Holding mutual funds in demat form is same as that of holding equity shares in demat form. In fact, investors can hold the mutual funds in the same demat account in which they have their equity shareholdings. This means you can electronically purchase or redeem mutual fund units and track the same in a single statement.
The mutual fund units can be converted into demat form just by submitting the request form for conversion which you can get it from your mutual fund distributor or broker or even RTA (Registrar and Transfer Agents). After the verification of the same, the depository CDSL (Central Depository Services Ltd.) or NSDL (National Securities Depository Ltd.) will send the form to asset management company or its registrar and transfer agents which in turn would verify and confirm the conversion request.
After the conversion into demat form, all the mutual fund transactions must be done through the broker. The broker would purchase the units and would credit it to your demat account and when your request to redeem the broker would debit the same from your demat account. Redemption is possible via broker or depository and you would send the redemption request form to the depository which post verification would forward it to the concerned AMC (Asset Management Company) or its registrar or transfer agents. Then the AMC or the RTA would pay to the broker’s pool from where you will receive your money into your bank account.
Though there are some advantages such as electronic transactions and single statement for all your investments via the stock exchange, however, it is to be understood that this all comes at a cost. Transactions via brokers would involve an annual demat fee of around Rs. 300 to Rs. 500 and brokerage may be more than 0.05 per cent per transaction.
The advantages of holding mutual funds in a demat form is very rarely noticed. Today's mutual fund industry is so digitally advanced that even without holding mutual funds in demat form transactions can be done at a click of a button.