A guide to Dematerialisation of Mutual Fund Units:
If not, below post will help you in making an informed decision on whether to Dematerialise your MF Units or not.
What is Dematerialisation/ Conversion of Mutual Fund Units?
Mutual Fund Units held in physical form i.e. represented by Statement of Account (SOA), can be converted into Dematerialised form in your Demat account with any Depository Participant (DP) of Central Depository Services Limited (CDSL) or National Securities Depository Limited (NSDL).
You can use your existing Demat account to convert the Mutual Fund Units into dematerialised form. If you don’t have one, you will be required to open a Demat account, with any DP of NSDL or CDSL.
Forms for Conversion
You need to obtain the Mutual Fund Destatementisation Request Form (MF-DRF) for CDSL or Conversion Request Form (CRF) for NSDL from your DP.
Procedure to convert the Mutual Fund Units (represented by Statement of Account) into Dematerialised/ Electronic form
1. In case of NSDL:
• Get the Conversion Request Form (CRF) from your Depository Participant (DP)
• Fill up the form
• Submit the duly filled Conversion Request Form (CRF) along with the Statement of Account (SOA) to your DP
• Once the due verification is complete, the CRF along with the SOA will be sent by your DP to the Asset Management Company (AMC)/ Registrar and Transfer Agent (RTA)
• The AMC/ RTA will then verify the conversion request executed by your DP. After the completion of due verification and confirmation of the request, Mutual Fund Units will be credited to your Demat account by the AMC/ RTA
2. In case of CDSL:
• Obtain the Mutual Fund Destatementisation Request Form (MF-DRF) from your Depository Participant (DP)
• Fill up the form
• Submit the form along with the SOA, to your DP
• The DP will then store the details in the CDSL system and forward the original MR-DRF and SOA to the Registrar and Transfer Agent (RTA) along with the system generated covering letter
• The RTA will then verify the conversion request executed by your DP. After the completion of due verification and confirmation, Mutual Fund Units will be credited to your Demat account by the RTA
Merits of holding Mutual Fund Units in Demat Form
• You can hold securities such as Debt and Equity Instruments, Government Securities and Mutual Fund Units under a single platform.
• You can check the details of all the Securities and Mutual Fund Units held in your Demat account in a single statement sent by your DP.
• If you have subscribed for internet based facility i.e. Internet-based Demat Account Statement (IdeAS) for NSDL, you can view the details of the latest balances and transactions that took place in your Demat account for the last 30 days.
• You can also check the prices of the securities and NAV of the Mutual Fund Units in your Demat account.
• Any change in your communication address once recorded with your DP will electronically get registered with all the AMCs and RTAs where you are holding securities/ Mutual Fund Units. It will remove the hassle of communication with each of them separately.
• You can freely transfer the Mutual Fund Units to the accounts of your nominee or legal heirs.
De-Merits of holding Mutual Fund Units in Demat Form
• Demat is Not Free of Cost: Your broker will charge an annual fee for the maintenance of your Demat account which ranges between Rs. 300 – Rs. 550. There will also be brokerage charges for every transaction, whether purchases or sale of Mutual Fund Units that varies from broker to broker.
• Limited Schemes: Schemes of not all Fund Houses may be available in your Demat account. You can purchase and sell the schemes of only those Fund Houses with which your Demat service provider has a tie up or which are listed in your account. So, if you want to invest in schemes of Fund House which is not listed in your Demat platform, you have to look for an alternative route.
• Probability of Online Fraud: You have to be a little tech savvy so that you check your portfolio, understand the holding statements and keep track of your Demat account to avoid fraud transactions and mismanagement by the brokers or financial advisors.
• No conversion of Units in Fraction: Mutual Fund Units held in fraction cannot be converted into Dematerialised form.
• Another limitation with Demat is, if your mutual investments are through a joint account, you can only include those investments in your Demat account if you have a joint holder Demat account and the primary & secondary holder are same in both the cases. For a single holder Demat account, you cannot hold joint account mutual fund investments and vice-versa.
Also read: Beginners Guide to Investing in Mutual Funds
FAQs on Conversion of Mutual Fund Units into Demat form
• Is it possible for the Non-Resident Indians (NRIs) to convert the Mutual Fund Units held under NRI status into Demat form through their DPs?
Yes, it is possible provided the Demat account is opened under the NRI category.
• Is it necessary to write the International Securities Identification Number (ISIN) of the Mutual Fund schemes while filling up the Conversion Request Form (CRF)?
Yes, it is required to fill the ISIN on the CRF. You can obtain the ISIN details of the Mutual Fund Schemes held by you from your DP. You can also retrieve the ISIN details by visiting the link below:
Note: International Securities Identification Number (ISIN) is a unique 12 digit alpha-numeric identification number that is allotted to the Mutual Fund Scheme.
• Do I need to submit a separate CRF for every folio number?
Yes, it is required.
• What should I do if some units are locked-in and some are free under the same ISIN?
You have to submit a separate CRF for the locked-in units and free units if such Mutual Fund Units (represented by SOA) are held under the same ISIN.
• What if there is a mismatch in the name and pattern of holding in my Demat account and the SOA?
In case of any mismatch in the name and holding pattern in your Demat account and the SOA, Mutual Fund Units cannot be converted into the Demat form.
Subscription/ Purchase of Mutual Fund Units
Mutual Fund Units subscription can be done through your Stock Broker with the use of the Stock Exchange platform. Upon subscription, your Stock Broker i.e. the Clearing Member will credit the Mutual Fund Units into your Demat account.
Redemption/ Sale of Mutual Fund Units
Redemption of Mutual Fund Units held in Demat form can be done through the below-mentioned modes:
1. Redemption through Stock Broker:
To redeem the units, you will have to submit the delivery instruction slip (DIS) to your DP once you have placed the order through your stock broker, for the transfer of Mutual Fund Units to the allotted CM pool account of BOI Shareholding Limited (BOISL)/ National Securities Clearing Corporation Limited (NSCCL). NSCCL/ BOISL will then credit the imperative funds in your Stock Broker’s Clearing Bank Account via regular settlement process for further payment to you.
2. Redemption through Depository Participant (DP):
• Obtain the redemption form from your DP
• Fill up the form
• Submit the form to your DP
• Once the due verification is complete, your DP will execute the electronic redemption request and forward the request electronically to the AMC/ RTA
• The AMC/ RTA after the verification of the redemption request will confirm the request and credit the money your bank account, the details of which are available in your Demat account.
You can transfer Mutual Fund Units from Demat account of one Depository to Demat account of another Depository or from one Demat account to another.
Note: You cannot transfer the Mutual Fund Units which are locked-in such as ELSS units which are locked-in for three years.
As I said earlier, it’s not compulsory to convert your Mutual Fund Units into Demat form. You have multiple platforms available through which you can track your investments. Go for the Demat account only if you need it, as Demat come with a cost. You can sign up on mymoneysage.in for exploring multiple options along with buying/selling/tracking your Mutual Fund investments online.