Towards Dematerialization

Mumbai, 1990- Pandya Bhai was in high spirits today. And so he wasn’t even tired of climbing all the way up to the 3^rd floor of the BSE. There was still a long time before Sharma would come and he was expecting Reliance to soar. Most of his fellow brokers had already assembled in the ring. He waited patiently. He took time off and made a call. ‘What’s the rate now?’ ‘110.’ Pandya grinned and ordered a cup of tea. He finished and went back. All of them were there. They all mounted the tables on the ring and started calling out loudly to each other. Pandya screamed aloud, ‘Reliance 120!’

Sharma waited outside the BSE, gazing up at it, biting his nails in the heat of May. Finally, Pandya emerged, looking solemn. ‘What’s the rate, bhaiya?’ Sharma asked. ‘Not much, only 105.’ Sharma nodded. ‘I’ll take it’. Pandya took out a piece of paper which Sharma signed. Pandya pocketed it and grinned widely.

Sharma waited for a month for the postal letter to come which would tell him if his investment was realized. Nothing happened. In desperation he called Pandya. ‘Bhai what happened?’ ‘What can I say bhaiya… if I haven’t received it as yet what can I give you?’ A troubled Sharma admitted defeat. His investment had failed. But little did he know how the price had soared and had been pocketed by Pandya.

Mumbai, 1995- The circular ring bearing resemblance to the Collosseum at BSE was desolate. It was just a historical artifact now. Two depositories- NSDL (National Securities Depository Limited) and CDSL (Central Securities Depository Limited) changed the face of investments. Rather than papers which were lost in the trading process, investments were now in the form of modules in the BSE. NSDL and CDSL acted like safe deposit accounts and trade became dematerialized (DEMAT). All the ups and downs of trade were now open to everyone to see and the role of the middlemen started to diminish. One could judge himself whether to buy or sell the shares and now, investments were possible only if one had a DEMAT account. Green figures meant rise in prices while red meant fall in prices. Shares and investments were realized in three days and communicated directly to the investor.

Mumbai, 1990- It was raining heavily- monsoons in Mumbai were never peaceful in July. Sharma was drenched as he stood opposite the BSE, tense. Pandya ran towards him, muck sprinkling across as he stepped in puddles. ‘Here, take this. Write your name and sign it’ he said. ‘But what of the previous one?’ he asked. ‘Arrey… That reached someone else… your certificate got delivered to someone else… forgive me…’ Sharma clapped a hand to his forehead.

Mumbai, 1996- Banks and top brokers joined hands as depository participants (DP) and introduced the trend of opening a DEMAT and trading account together. One had to get a share certificate and submit it to the DP for registration. One could withdraw it as and when required. After it had been submitted, the DP opened your account and gave you a code number against the certificate. It entered this code number and registered you as the owner of that particular account in its electronic system and destroyed the certificate. Hence, yet again, dematerialization was taken to a new level and conspiracies were avoided. One could sell the certificate by marking it as lien by easily accessing it online in its electronic form. Also, with the advent of online trading one could see the rising and falling prices of shares on the internet.

Dematerialization and electronic format has hence not only stopped corrupt practices but also made investments just a click of the mouse button away. Mr. Sharma could now breathe a sigh of relief.